Preamble

The House being met, the Clerk at the Table informed the House of the unavoidable absence, through indisposition, of Mr. SPEAKER from this Day's Sitting. Whereupon Sir DENNIS HERBERT, the CHAIRMAN of WAYS AND MEANS, proceeded, to the Table, and, after Prayers, took the Chair as DEPUTY-SPEAKER, pursuant to the Standing Order.

NEW WRIT.

For the Borough of West Bromwich, in the room of the Right Hon. Frederick Owen Roberts (Chiltern Hundreds).—[Mr. Whiteley.]

Oral Answers to Questions — PALESTINE.

ENEMY NATIONALS (EXCHANGE).

Mr. Wedgwood: asked the Secretary of State for Foreign Affairs whether, in order to rid Palestine of Nazi Aryan settlers, whose continued residence there is generally not desired, he will extend to males of military age his proposed scheme for an exchange of internees between Germany and Palestine?

The Under-Secretary of State for Foreign Affairs (Mr. Butler): It is contrary to the policy of His Majesty's Government to repatriate male enemy nationals of military age. I regret therefore that the right hon. Member's suggestion cannot be entertained.

Mr. Wedgwood: Will the right hon. Gentleman say how this exchange is going on, and whether it is a fair exchange?

Mr. Butler: I can only limit my answer to the original answer I gave, that is, that it would be contrary to the policy of His Majesty's Government to repatriate enemy nationals of military age. To that extent no exchange has taken place.

CITRUS INDUSTRY.

Mr. Creech Jones: asked the Undersecretary of State for the Colonies

whether the Government have yet reached any decision in regard to assistance to the citrus industry in Palestine?

The Under-Secretary of State for the Colonies (Mr. George Hall): Approval has now been given to a scheme under which advances will be made by the banks, with the support of the Government of Palestine, to enable citrus groves to be maintained for the year 1941–42. The arrangements concluded between the Government of Palestine and the banks in respect of these advances and of the settlement of the advances made last year for the 1940–41 crop, provide for the assumption by that Government of a maximum additional liability, over the two years, of £517,000. My Noble Friend has informed the High Commissioner for Palestine that, if the resources of Palestine should prove to be insufficient to meet any liability incurred under this guarantee, His Majesty's Government will be ready to afford such financial assistance as may be required. Further advances, up to a maximum of £100,000, will be made by the Government of Palestine direct, in order to encourage the development of other branches of agricultural production in substitution for citrus. Full details are contained in an announcement which is being released for publication in Palestine to-day, the text of which I will circulate in the OFFICIAL REPORT.

Mr. Stokes: What interest is to be paid on the loans?

Mr. Mathers: In view of the importance of this industry to Palestine, are steps being taken to provide increased facilities for the taking up of the crop?

Mr. Hall: If my hon. Friend will read the scheme, as outlined in the announcement, he will see what is being done.

Following is the text of the announcement:
The Government of Palestine has reviewed the position of the citrus industry in relation to the financial assistance given in 1940, in collaboration with certain of the principal banks operating in Palestine, and to the issue of cultivation advances for the year 1941–42. Last year financial aid was afforded by these banks, under a limited guarantee by the Government, to help the industry tide over the crisis which it then faced. In the event it was not found possible to export any appreciable part of the crop and in consequence growers have not been able to meet their obligation to the banks.


The Government of Palestine, with the approval of the Secretary of State for the Colonies, has now decided to reimburse the participating banks to the full extent of the outstanding amount of 1940 advances and the amount involved will then become a debt due by growers concerned to the Government. In consideration of this reimbursement the banks have agreed to make advances for the year 1941–42 on substantially the same terms as to Government guarantee as were applied to the 1940–41 advances. The 1940–41 advances, which now become wholly a Government charge, will, however, be made a first charge on the 1941–42 crop. The following conditions are an essential part of the scheme:—
(a) The area to be covered by the advances to be limited to 170,000 dunums.
(b) Only groves planted before the end of 1935 and in good condition will be considered.
(c) Credit-worthiness of growers
(d) Interest at the rate of 6 per cent, will be payable.
The first year's interest, i.e., approximately 200 mils out of each £P.3.200 mils advanced, will be deducted when advances are issued. No additional charge will be levied by the banks in respect of administration expenses.
It is intended that advances shall be issued in two equal instalments, the first before the end of April and the second at the end of June.
The Government realises that limitation to 170,000 dunums may mean that it will not be possible for every bearing dunum of groves in good condition to qualify for an advance and furthermore that advances at the maximum rate approved may be insufficient to do more than keep the trees alive but not at full bearing capacity. It must be appreciated by the growers, however, that the amount of public funds which can be made available, by guaranteeing loans or otherwise, is necessarily limited. Further, the necessity for grove-owners to diversify their activities and so broaden the basis of farming in the citrus area, with advantage to the growers who would become more self-supporting, is obvious. To further this purpose the Government of Palestine will provide loans to an amount not exceeding £P. 100,000 to approved grove-owners for the acquisition of stock and poultry, the erection of cattle-houses and poultry-houses, ploughs, the purchase of seeds and fertilisers and the extension of irrigation. In this way it is hoped not only to secure a considerable increase in the production of foodstuffs in Palestine but also to give more stability to those who, as producers, are fundamental to the citrus industry itself.

INCOME TAX.

Mr. Wedgwood: asked the Undersecretary of State for the Colonies whether, in view of the fact that an official from India is now framing an Income Tax ordinance for Palestine, it is intended to exempt from this tax, as in India, owners of land, although by now the land of Palestine must be all zoned and valued?

Mr. George Hall: The question of introducing Income Tax legislation in Palestine is under examination by the Palestine Government with the assistance of an expert adviser, and I am not at present in a position to make any statement on the matter.

Mr. Wedgwood: Will the hon. Gentleman bear this point in mind when these considerations are being taken into account, so that the landlords should not escape, as they do in India?

Mr. Hall: We must await the report.

Oral Answers to Questions — WAR AND PEACE AIMS (LORD HALIFAX'S SPEECH).

Mr. Mander: asked the Secretary of State for Foreign Affairs whether consultations took place with the Allied Governments in connection with the recent declaration made by His Majesty's Ambassador in New York, on British war and peace aims?

Mr. Butler: No, Sir.

Mr. Mander: May I ask whether the statement of war and peace aims made by Lord Halifax represented the views of the Allied Governments as well as of the British Government? Surely that is desirable.

Mr. Butler: It may be desirable to have a community of views, which I think exists between His Majesty's Government and the Allied Governments, but we very often speak for ourselves in these cases, and on this occasion Lord Halifax was speaking as our Ambassador at Washington.

Mr. Mander: As consultations did not take place, will my right hon. Friend be good enough to consider entering into conversations with the Allied Governments with a view to making a statement generally?

Mr. Butler: I have no doubt that if the Allied Governments have any observations to make, they will send them to us.

Oral Answers to Questions — FOREIGN DIPLOMATIC REPRESENTATIVES.

Mr. Martin: asked the Secretary of State for Foreign Affairs whether the representatives of States adhering to the


Axis or Tripartite Pact are allowed the usual diplomatic immunity for correspondence in this country; and whether, in view of the grave consequences of this situation, the Government will give careful consideration to this position?

Mr. Butler: I set out the general position as regards diplomatic immunities in the replies which I gave on 19th and 27th November. I am sending copies to the hon. Member. Since that date, diplomatic relations with Rumania and Bulgaria have been broken off.

Oral Answers to Questions — FRENCH AND SPANISH NORTH AFRICA (GERMAN PERSONNEL).

Mr. Martin: asked the Secretary of State for Foreign Affairs whether he has any information to give the House on the increases in the number of German personnel in French and Spanish North Africa?

Mr. Butler: Estimates of the strength of the German armistice commissions and other German personnel in French North Africa vary considerably, and I could not quote a figure; but there are indications that the number may have increased. There are German consular officials in the Spanish Zone of Morocco, and a German Consulate has recently been re-opened in Tangier.

Mr. Martin: Has the right hon. Gentleman any reason to suppose that any of the troops now operating in Libya came from Tunis?

Mr. Butler: I cannot give that information without notice.

Mr. Cocks: Has not the number of Germans in Tangier considerably increased since the conclusion of the Hoare-Suner Pact?

Oral Answers to Questions — DIPLOMATIC AND CONSULAR OFFICIALS (STERLING DEPRECIATION).

Mr. Culverwell: asked the Secretary of State for Foreign Affairs whether he is aware of the disadvantages suffered by diplomatic and consular officials abroad owing to the depreciation of sterling; and will he make them an allowance to compensate them for the loss on exchange?

Mr. Butler: I am aware of the disadvantages referred to by my hon.

Friend. No general system of exchange compensation has been adopted which is applicable to all countries where sterling has depreciated. Alternative steps have, however, been taken with the object of enabling diplomatic and consular officials to discharge their representative duties without financial embarrassment.

Mr. Culverwell: Is the right hon. Gentleman aware that even when exchange is normal these officers find it very difficult to make both ends meet, and that now, when exchange has fallen so considerably, it is quite impossible for them to meet their necessary expenses?

Mr. Butler: Yes, Sir; and I think the hon. Member is doing a service in drawing attention to this question, and I hope that I am also doing a service by drawing attention to the steps which we are taking to remedy it.

Mr. Stokes: Will they all be put on the same footing as our Ambassador in Madrid?

Oral Answers to Questions — FINLAND (BRITISH VOLUNTEERS).

Major-General Sir Alfred Knox: asked the Secretary of State for Foreign Affairs whether he can give any information of the conditions under which British volunteers are now living in Finland; and what prospect there is of their repatriation.

Mr. Butler: The British volunteers stranded in Finland, with the exception of a few who are giving English lessons, are now housed in a camp under the supervision of a Finnish body called the Finnish Volunteers Bureau. The Finnish Government provide board and lodging and 10 Finnish marks a day to each volunteer as pocket-money. The Finnish Aid Bureau, a British institution, provides a supplementary ration, clothing and a further 10 marks a day pocket-money, and, by arrangement with the Finnish Government, certain facilities for recreation. The repatriation of these volunteers depends to a large extent on the granting of visas by the Soviet Government, with whom the question has been taken up.

Sir A. Knox: How many of these volunteers have been repatriated in the last month?

Mr. Butler: I understand this applies to five of them.

Mr. Shinwell: Would not this problem be more capable of solution if the Government were a little more responsive to the requests made by the Soviet Government for the repatriation of Latvian and Estonian seamen?

Mr. Butler: Certainly the Soviet Government desire the repatriation of these seamen, and we desire the repatriation of our nationals, and so something might be made of this matter at both ends.

Mr. Shinwell: While something might be made of it, is it not true to say that His Majesty's Government have been dilatory in coming to a decision in this matter, and is there any hope that more expedition will be shown?

Mr. Butler: I do not think there is any doubt about the attention paid by His Majesty's Government to this matter, but we have come up against serious difficulties, all of which have been made clear to the Soviet Ambassador in conversations, and we shall do our best to try to reach a settlement.

Sir A. Knox: How many volunteers remain in Finland?

Mr. Butler: Over 100.

Oral Answers to Questions — POLISH PUBLICATIONS.

Mr. Lipson: asked the Secretary of State for Foreign Affairs whether he will represent to the Polish Government that the anti-semitic and Fascist articles appearing in the Polish newspaper "Jestem Polakiem" are causing grave concern to many friends of Poland in this country.

Mr. Butler: The Polish Government are well aware of the views of His Majesty's Government on this question. I understand, however, that this Polish paper is not in any way connected with the Polish Government, whose general attitude has been made clear in statements published on 2nd September, 22nd November and 2nd December last in the "Dziennik Polski", the only Polish political paper appearing in this country which they recognise officially. I am communicating a translation of these statements to the hon. Member.

Mr. Lipson: In view of the fact that these articles are quite opposed to the objects for which we are fighting this war, will my right hon. Friend consider whether it is not possible to deport the writer of them, who is taking advantage of the hospitality offered by this country?

Mr. Butler: I think I had better refer hon. Members who are interested in this matter to an answer which is to be given later by my right hon. Friend the Minister of Information to a Question on the subject.

Mr. Silverman: Is the right hon. Gentleman aware that these offensive publications are not confined to this newspaper, but ate to be found in a great many other papers published in Polish in this country, and can he say how those papers are financed?

Mr. Butler: As I say, I had better refer the hon. Member to an answer which is to be given by the Minister of Information.

Mr. Noel-Baker: In view of the fact that these articles are in fact opposed to the declared policy of the Polish Government, and are known to be offensive to very many Poles, as to all British people, could not His Majesty's Government make representations to the Polish Government that they should themselves take some action?

Mr. Butler: I think the Polish Government probably feel this more deeply than we do, and will do what they can to counteract the effect of these articles. I am glad to take the opportunity of saying that this paper has nothing to do with the Polish Government.

Mr. Wedgwood: asked the Minister of Information whether his attention has been called to an anti-Semitic Polish publication, "I am a Pole"; what steps he is taking to ban that journal which is conducting a policy so contrary to our own war effort that the Germans have used it as anti-British propaganda in Poland; and whether as this publication does not meet with the approval of the Polish Government, he will see that this paper is suppressed without delay?

The Minister of Information (Mr. Duff Cooper): Yes, Sir. My attention has been drawn to the paper in question, which has not received any assistance or support


from the Ministry of Information. As regards the second and third parts of the Question, responsibility for the suppression of newspapers does not rest with the Ministry of Information.

Mr. Wedgwood: Is it not possible for the Ministry of Information to stop the supply of paper, as they have control over it?

Mr. Cooper: This paper originally appeared before certain powers were taken by the Ministry for stopping paper, and I understand that the publishers already have a sufficient supply. It is not in our power to prevent their getting paper at present.

Mr. Silverman: Can the Minister say-how it is that papers are allowed to be published in Polish which would be suppressed if they appeared in English?

Mr. Cooper: I cannot accept the hon. Member's assumption that this paper would be suppressed if it was in English. It has never been the policy of the Ministry to suppress a paper simply on account of its views.

Mr. Silverman: Is the Minister aware that this paper is definitely, clearly and overwhelmingly Fascist in outlook and in the views which it expresses, and does he say that it is permissible under the Regulations?

Mr. Cooper: As the hon. Member is aware, only two papers have so far been suppressed since the outbreak of the war. The question of suppressing papers does not rest with the Ministry of Information; it is only when the papers are really doing great harm to the war effort of the country that they are suppressed. I am not saying that this paper should not be suppressed.

Oral Answers to Questions — SYRIA (STATUS).

Mr. Garro Jones: asked the Secretary of State for Foreign Affairs whether he has any information in regard to an offer made by the Vichy Government to the Turkish Government affecting a change in status of Syria to Turkey's advantage, on condition that Turkey revised its policy in Europe?

Mr. Butler: So far as I am aware, no such offer has been made to the Turkish Government.

Mr. Garro-Jones: Seeing that there have been extensive reports to this effect in usually reliable newspapers, is the right hon. Gentleman satisfied that this does not represent one further failure of our diplomatic service to provide his right hon. Friend with information about what is going on?

Mr. Butler: I should repudiate any such suggestion. My right hon. Friend is exceptionally well informed, as has been indicated by many recent events, and in this case, if the hon. Member will direct my attention to circumstantial evidence, he will make us even better informed than we usually are.

Oral Answers to Questions — TANGIER.

Mr. Cocks: asked the Secretary of State for Foreign Affairs whether he will place a copy of the Hoare-Suner provisional agreement on Tangier in the Library, together with a translation?

Mr. Butler: I explained to the hon. Member last week that the substance of the agreement has been communicated to the House. I will certainly discuss the hon. Member's suggestion with my right hon. Friend on his return.

Mr. Cocks: Will the right hon. Gentleman say what there is in this document, if there is a document, which makes it so improper that even Members of Parliament are not allowed to read it?

Mr. Butler: There is nothing improper in it at all. There are a few technical matters in addition to the substance of the agreement, which I have given to the House. I should prefer to mention this matter to my right hon. Friend on his return, and I will put the suggestion to him. There is no mystery.

Mr. Noel-Baker: Is it not desirable that this agreement should be published at the earliest possible date?

Oral Answers to Questions — MINISTRY OF INFORMATION.

FILMS FOR TROOPS.

Captain Duncan: asked the Minister of Information whether he will encourage the use of films made by his Department by the military authorities for the enlightenment and entertainment of troops?

Mr. Cooper: Yes, Sir. I am glad to say that a number of requests for copies of Ministry films for exhibition to the troops have already been made by the War Office.

Captain Duncan: Is my right hon. Friend in touch with the Navy, Army and Air Force Institutes and the welfare department of the War Office, and can he say whether there is any technical difficulty in multiplying the number of copies of some of these Ministry films which men are very anxious to see in outlying districts?

Mr. Cooper: Yes, I am in touch with the welfare branch of the War Office, and there is no difficulty, so far as I am aware, in securing any number of copies of these films.

Mr. Granville: Is the extremely interesting and instructive film of the military operation called the "Lofoten Raid" available for military camps and for use?

Mr. Cooper: I think so.

STAFF.

Captain Cunningham-Reid: asked the Minister of Information what proportion of the executive staff of the Ministry of Information were previously civil servants in other Government Departments or former members of the legal profession?

Mr. Cooper: I do not know what grades the hon. and gallant Member designates as executive. Of the 50 senior officers of the Ministry, 17 were previously civil servants in other Departments and 3 members of the legal profession.

Captain Cunningham-Reid: Would it not be better if a greater proportion of the senior officers at the Ministry of Information consisted of those who have had long and successful training in the art of giving information in the right way, such as expert publicity men and first-class journalists?

Mr. Cooper: A great many of the officials at the Ministry consist of those who have had training such as the hon. and gallant Member has suggested.

PHOTOGRAPHS.

Captain Cunningham-Reid: asked the Minister Information whether the

heads of his Department that deals with photography are people of proved and long experience of publicity?

Mr. Cooper: Yes, Sir

Captain Cunningham-Reid: That being so, why is it that a photograph such as I am holding in my hand at the present moment, showing one German airman trying to carry a wounded comrade at a London railway station, has been allowed to be released? Does it not show to the world an apparent lack of humanity on our part, and that we cannot even supply a stretcher for a wounded airman in London; and, further, is it not the kind of propaganda that is calculated to lay our own prisoners of war open to reprisals?

Mr. Cooper: I have not seen the photograph which the hon. and gallant Member holds in his hand, and therefore I cannot give an opinion concerning it, but I have no reason to suppose that it was a photograph which was issued by the Ministry of Information. We have no power to prevent publication of photographs unless they are likely to give information to the enemy.

Captain Cunningham-Reid: Is there no censorship?

Mr. Deputy-Speaker: The hon. and gallant Member has already asked three supplementary Questions in one.

"THE BATTLE OF BRITAIN."

Colonel Burton: asked the Minister of Information the reason why the pamphlet "The Battle of Britain" is not allowed to be circulated abroad except through the Stationery Office; and whether he will cause the ban to be removed, so that this propaganda may reach a very much larger public through private persons?

Mr. Cooper: My hon. and gallant Friend is mistaken in thinking that this pamphlet is not allowed to be circulated abroad except through the Stationery Office. Every available means is being used to ensure that it receives the widest possible publicity abroad.

Mr. R. C. Morrison: Will the Minister take steps to see that there are available a few copies in the Vote Office, as I have been endeavouring to get a copy ever since it was published?

Mr. Cooper: I will endeavour to do so.

Mr. Thorne: Is the Minister aware that it is almost impossible to get a copy of this book on any of the bookstalls, and does he not agree that there should De some means whereby Members of Parliament can get one? If it had not been for his good offices, I should never have got a copy.

Mr. Cooper: I know there has been a shortage, because the demand has proved to be greater than anticipated, but the shortage will soon be met, if it has not been met already, and efforts will be made to see that copies are available on all bookstalls.

TRAVELLERS' CENSORSHIP OFFICE.

Mr. R. Gibson: asked the Minister of Information whether he is aware that the work done by the Travellers' Censorship Office, in enabling ship's documents and bills of lading to accompany a ship clearing with exports, is essential; whether he can assure the House that this essential work will continue; and whether he has any statement to make regarding the censorship of Icelandic and Faröes mails?

Mr. Cooper: The scrutiny of the ship's documents is a matter for the senior naval officer at the port and not for the censorship. Bills of lading and similar papers not sent by post are a matter for the security officer at the port, who may consult the censorship if he considers it necessary. The importance of the work is fully realised. The reply to the last part of the Question is in the negative.

Mr. Gibson: Are we to understand that there will be speedy censorship of these documents and other letters which are necessary to accompany export consignments?

Mr. Cooper: Everything will be done to make the censorship as speedy as possible.

Oral Answers to Questions — ROYAL AIR FORCE.

OFFICERS' FUNERAL EXPENSES.

Sir Henry Morris-Jones: asked the Secretary of State for Air whether he is aware that recently the Director of Accounts at the Air Ministry requested the payment of funeral expenses from the family of a Royal Air Force officer, killed by enemy action on his own aerodrome in

this country, whereas funeral expenses, in the case of officers or men whose death results from aircraft accident at home or abroad, are payable by the State; and whether he will alter this anomaly under paragraph 3394 of the Regulations for the Royal Air Force, 1939 edition, and make redress in the particular case above referred to?

The Secretary of State for Air (Sir Archibald Sinclair): The funeral expenses of officers stationed in this country are admissible as a limited charge against public funds only when death results from an aircraft accident. I understand that in the case referred to by my hon. Friend the cost of the funeral was, in accordance with the Regulations, properly debited in the statement of account which is compiled in respect of the Service estate of a deceased officer. Liabilities on the account, including the cost of the funeral, exceeded the available assets and it was therefore necessary to make a request for payment to the officer's representatives. I am now looking into the question of whether the present rule should be modified, but it is a question which affects other Services, and I am afraid that I cannot to-day anticipate the decision.

Mr. R. Gibson: Will the modification apply to other ranks?

JANE'S "ALL THE WORLD'S AIRCRAFT."

Mr. Garro Jones: asked the Secretary of State for Air whether any copies of Jane's "All the World's Aircraft," just published, have been exported from this country; whether he has any statement to make on the matter contained in this annual publication, more particularly on pages 15A–26A, on offensive references to the United States of America, on the large amount of technical information published, and on the repeated claims that certain information will be of value to readers overseas; that it has been given by courtesy of senior officers of the Air Ministry intelligence department or other departments of the Air Ministry; and whether he is satisfied that the publication referred to contains no material of value to the enemy or detrimental to the public interest?

Sir A. Sinclair: I understand that before the publishers had decided to stop the issue of further copies of this book and, so far as possible to withdraw copies


already issued, some 50 are believed to have left the country, a few of which may have been sent to the United States. I am satisfied that this publication contains no new information which would be of value to the enemy, most of the matter having already been published during the past year. No special facilities were given by any department of the Air Ministry to those responsible for its production. The greater part of the contents was submitted for censorship at the Ministry of Information, but not the offensive caption referred to by my hon. Friend, which has already been reported in the Press. The publication of this book could not have been prohibited on grounds of security. I feel sure that the House will join with me in condemning the irresponsible and outrageous reference in this publication to the welcome and increasing help which we are receiving from the United States of America.

Mr. Garro Jones: While thanking my right hon. Friend for his reply, may I ask whether he is aware that the efforts of the publishers to recover possession of this publication have not gone so far as the Library of the House of Commons, at any ráte? Secondly, does he think it right that a writer who has, if I may put it this way, such liberal ideas about the Nazi regime that he was compelled to relinquish the editorship of the "Aeroplane" at the outbreak of the war, should be able to claim special access to high intelligence officers of the Air Ministry and to contribute articles about technical information and air strategy regularly every week to the technical journals and publications in this country?

Sir A. Sinclair: Questions about a particular book lying in the Library of the House of Commons are a matter for the House rather than for me. As regards the second part of the Question, I did tell my hon. Friend in my main answer that it is untrue to say that officers of my Department gave special facilities or information to the author of this book. I am assured that the passage in the book to which I know my hon. Friend refers is inaccurate and unjustified.

Mr. Garro Jones: Will the Minister do what I am unable to do in a Supplementary Question—ask hon. Members to look at the publication in the Library, and

to say whether they are satisfied that the censorship and intelligence system at the Air Ministry is in proper working order?

Sir A. Sinclair: I should be very glad if hon. Members did that. I am told that there is no new information in the book. What I regret, and what I think all Members in all parts of the House-regret, are the outrageous opinions expressed in the book. We have no censorship of opinion, and I feel sure that my hon. Friend would agree that such would be undesirable.

Mr. Wedgwood: Is the right hon. Gentleman aware that I have myself communicated to the Government an article by this man previously, asking that he should be prevented from getting information and that he should be interned? I really do not know why this has been going on for so long; it is nearly a year now.

OFFICERS' OUTFIT ALLOWANCE.

Mr. Burke: asked the Secretary of State for Air what amount is allowed to officers in the Royal Air Force for the purchase of their uniforms?

Sir A. Sinclair: The outfit allowance to which an officer is entitled on being commissioned in the Royal Air Force or Royal Air Force Volunteer Reserve is £40.

Mr. Burke: Is it not desirable that these officers, when training the youth of the A.T.C. should be given an allowance adequate to maintain their positions in dignity and respect?

Sir A. Sinclair: The men to whom the hon. Gentleman refers have less kit to buy than officers of the Royal Air Force.

PIGEONS.

Sir Robert Young: asked the Secretary of State for Air whether there is any control of the number of pairs of homing pigeons which members of the National Pigeon Service are permitted to breed from, and if so, why and what is the maximum annual requirements of grain for the feeding of show and high-flying pigeons; and whether the amount required is actually withdrawn from the 1,400 keepers of fancy pigeons of different breeds in this country?

Sir A. Sinclair: Control is exercised by the Committee of the National Pigeon


Service by the issue of food coupons to members who undertake to provide a definite number of pigeons for Government purposes. The shipping situation has made it necessary to reserve all pigeon food for the use of pigeons required by the Services. The total number of show and high-flying pigeons in this country is not readily ascertainable and I cannot therefore say what the annual requirement in grain would be.

Sir R. Young: Am I right in assuming that 1,400 people who own show pigeons are being asked to sacrifice their hobby in the interests of homing pigeons required for the Services? Is my right hon. Friend aware of the difference in treatment between this recreation of the working man and that of the wealthy racehorse owners?

Sir A. Sinclair: I would not put it that these people are being called upon to make special sacrifices; the position rather is that there is only room to import a certain amount of foodstuffs. Therefore, special arrangements are being made in regard to the food for pigeons which are useful to the public service.

Sir William Davison: Is the right hon. Gentleman aware of the amount of damage done to allotments by thousands of pigeons in London? Can nothing be done to kill them off?

ROYAL OBSERVER CORPS.

Sir Patrick Hannon: asked the Secretary of State for Air whether he is now in a position to make a statement about the future of the Observer Corps?

Sir Adam Maitland: asked the Secretary of State for Air whether he is aware of the opinion in some quarters that the importance of the work of the Observer Corps has not been sufficiently recognised; and whether he is able to inform the House of the results of his recent inquiries into general matters affecting the Observer Corps, and of any proposals of improvement it is intended should be made?

Sir A. Sinclair: I am happy to inform the House that, in recognition of the valuable services rendered by the Observer Corps over a number of years, His Majesty the King has been graciously pleased to approve that the corps shall henceforward be known by the style and description of "The Royal Observer Corps." I have recently had under re-

view various questions relating to the status and conditions of service of the corps, and I have arranged to place in the Library, for the convenience of Members, a summary of conclusions on the main points of principle and detail, and of the action that has been taken or is in progress.

Lieutenant-Colonel Heneage: When will it be possible to give to the Observer Corps the uniforms for which they have been asking so long?

Sir A. Sinclair: The question of the uniform is dealt with in the paper to which I referred.

Squadron-Leader Grant-Ferris: Is it not a fact that most of these men do not want uniforms?

Oral Answers to Questions — POST OFFICE.

COMMEMORATIVE STAMPS.

Mr. Mander: asked the Postmaster- General whether he will consider the advisability of issuing an Anglo-American stamp, in association with the authorities of the United States of America, as a symbol of the unity of the two great Anglo-Saxon nations in the present struggle?

The Postmaster-General (Mr. W. S. Morrison): I would refer my hon. Friend to the answer given by my hon. Friend the Assistant Postmaster-General to a similar Question asked by the hon. Member for the University of London (Sir E. Graham-Little) on 3rd April, 1941.

Mr. Mander: Is my right 'hon. Friend in consultation with the United States Government on the subject?

Mr. Morrison: I would like some time to explore the situation. There are many considerations involved.

Mr. McGovern: Will the Minister consider putting on the stamp, if it should be issued, a photograph of Montagu Norman?

BRITISH PRISONERS OF WAR (PARCELS).

Mr. Burke: asked the Postmaster- General whether he is aware that for many months relatives of prisoners of war in Germany have been sending parcels to them in accordance with the regulations and in many cases at great financial cost, which have never been received; and whether he can take any action to put this matter right?

Mr. W. S. Morrison: I am aware that many next-of-kin parcels have been despatched to prisoners of war since last autumn, and that no acknowledgments have yet been received. This does not necessarily mean that none of these parcels have reached the camps: it is known that 32,000 of them had reached Geneva by the beginning of March, and it is therefore probable that many have by now been delivered to the prisoners and that acknowledgments are on their way. I am watching the position closely and am doing all in my power to see that these parcels get through.

Mr. Burke: Is it not a fact that for many months prisoners have been sending to their relatives letters saying that they have not received parcels, and is it not possible to make it clear that the British Government are doing all that is possible, because people in this country are under the impression that the Government are not doing all they should? Cannot we bring any pressure on enemy countries to get the parcels through?

Mr. Morrison: Part of the difficulty consists in transport, not only through enemy but neutral countries, where the parcels are outside my control. Some time ago I despatched to the spot an experienced officer who is doing all that he can to facilitate the arrangements at these neutral post offices and to make sure that the parcels receive the speediest possible treatment.

Mr. Mathers: In view of the fact that some parcels to prisoners are in arrears in respect of acknowledgment, would the right hon. Gentleman advise people not to send any further parcels until they know that all the parcels which are on the way are getting through?

Mr. Morrison: I do not think that that would be advisable. Thirty-two thousand of these parcels are known to have reached Geneva at the beginning of March, and I do not think that I could accept the suggestion of the hon. Member.

LETTER COLLECTIONS, LONDON.

Mr. Keeling: asked the Postmaster-General why there is still no later collection from pillar boxes in London than 5.30 p.m.?

Mr. W. S. Morrison: During the period in which the extra hour of summer time

will operate, that is, 5th May to 9th August, collections will be made between 6.30 p.m. and 7 p.m. in London head districts, and between 6 p.m. and 6.30 p.m. in the sub-districts.

Mr. Keeling: Would not our efforts to win the war be stimulated and lubricated if the Post Office kept pace with the sun, instead of being two or three hours behind it?

Mr. Morrison: I do not think that in these times it could be suggested that we are not keeping pace with the sun. These arrangements are very complicated. If my hon. Friend would like to look through them in detail with me, I should be happy to give him the opportunity.

MAILS (INDIA).

Mr. R. Gibson: asked the Postmaster-General whether he has any statement to make with regard to the transmission of mails between the United Kingdom and India; and when he expects the air-mail service to be accelerated and to what extent?

Mr. W. S. Morrison: There is a fairly frequent mail service between the United Kingdom and India by surface route; but owing to war conditions the mails are being forwarded via the Cape and take from six to nine weeks in transit. Air mails for and from India are in general conveyed by sea between this country and South Africa and by air between South Africa and India. The service with India and other Empire countries is engaging the attention of the Government and advantage will be taken of every opportunity of improvement.

Mr. Gibson: Can the right hon. Gentleman give any indication in regard to the time of any improvement?

Mr. Morrison: No, Sir, I cannot, except to say that every opportunity that presents itself as the situation changes will be used to increase the speed of transit.

MESSENGER SERVICE.

Sir Percy Hard: asked the Postmaster-General whether his attention has been drawn to the practice of officials of his Department, as in Wiltshire, who tempt children away from secondary schools by offers of employment as messengers before the completion of their school course in defiance of the under-


taking which parents are required by the Board of Education to sign stipulating that the children shall remain at school until the end of the school year following their 16th birthday; and whether he will cause this practice to cease?

Mr. W. S. Morrison: Appointments in the messenger service in the Post Office are intended primarily for boys and girls from elementary schools and the maximum age limit for appointment is 14½ for boys and 15 for girls. The Post Office does not seek to attract secondary school pupils to such appointments, but it is not the practice to refuse to consider such candidates if their parents desire them to leave school for the purpose of a career in the Post Office. I understand that in the case which my hon. Friend has in mind the approach was from the child's grand-parents, and that the position in view was that of assistant at a sub-post office.

Sir P. Hurd: Does the right hon. Gentleman realise that if this practice is persisted in, the whole of the secondary school system of this country will be undermined?

Mr. Morrison: I do not think that that follows. As I said, we do not seek to attract pupils from secondary schools, but the career of a boy messenger is by no means a blind-alley occupation, and men have risen from that rank to very high positions in the Post Office. If everybody is agreeable to boys or girls taking up that career, I do not think it would be proper for the Post Office to refuse to consider them as candidates simply because they had been to secondary schools.

Oral Answers to Questions — BUILDING CONSTRUCTION (EXPERT ADVICE).

Mr. Stokes: asked the Parliamentary Secretary to the Ministry of Works and Buildings what qualifications Major-Genera I Appleyard, M.I.M.E., has for the work which he is required to do in the emergency repair organisation of his Department?

The Parliamentary Secretary to the Ministry of Works and Buildings (Mr. Hicks): I would refer the hon. Member to the second part of my answer to his Question on the same subject on 25th March, 1941.

Mr. Stokes: Does my hon. Friend really expect us to believe that a mechanical engineer who has spent most of his life settling industrial disputes is the best person for a large engineering job of this kind?

Mr. Hicks: I can only answer my hon. Friend by explaining that the qualifications of the candidates were taken into serious consideration at the time of the appointment, and those responsible for the appointment considered that this man had all the necessary qualifications.

Viscountess Astor: Is it not true that he is one of the ablest men in the whole of England?

Oral Answers to Questions — DUMPED MATERIAL, HYDE PARK.

Mr. Stokes: asked the Parliamentary Secretary to the Ministry of Works and Buildings why rubble from damaged buildings is being dumped into Hyde Park, whilst at the same time rubble is being removed from the same dump for filling purposes?

Mr. Hicks: The material being dumped in Hyde Park is hardcore collected from a number of scattered sites in the area. The hardcore is being used for building purposes, and the lorries taking the material away are delivering it to sites outside the London area. Facilities for rapid loading of vehicles at the dump have been provided, and this avoids the delays and difficulties which would arise if the lorries running to and from given centres were loaded at scattered points.

Mr. Stokes: Would it not be better if the hardcore was carried directly from one hole to another hole, just as we now direct the gold resources of the British Empire?

Oral Answers to Questions — ROYAL NAVY.

EMERGENCY LIST OFFICERS.

Commander Sir Archibald Southby: asked the First Lord of the Admiralty whether those naval officers on the emergency list who, by reason of their re-employment in time of war, complete the necessary time in order so to qualify, will become eligible to receive pensions on their reversion to the emergency list?

The First Lord of the Admiralty (Mr. A. V. Alexander): The Regulations expressly provide that the war service of emergency list officers does not qualify for retired pay.

Sir A. Southby: asked the First Lord of the Admiralty whether he is aware that officers who were transferred to the emergency list prior to 25th May, 1927, were so transferred on the explicit understanding that in the case of re-employment in time of war they would receive a bonus of 25 per cent. in addition to the full pay of their rank; why this agreement has been repudiated by the Admiralty; and on what grounds it has now been decided that, although the bonus is to be paid in future, no payment will be allowed for any period prior to the 4th February, 1941?

Mr. Alexander: In order to remove anomalies, revised conditions of pay were made in 1927 for officers on the emergency list when called up in time of war. To have continued to pay the 25 per cent. bonus for service in war would have resulted in placing them in a preferential position over retired officers awarded a gratuity but no retired pay. It was, therefore, decided to terminate this condition of pay. Subsequently it was represented on behalf of officers on the emergency list before 25th May, 1927, that they had not-been specifically informed of the change. It was therefore decided to grant to these officers the bonus of 25 per cent. as from 4th February, 1941. In all the circumstances this was a substantial concession, which I am not prepared to increase.

Sir A. Southby: Does the right hon. Gentleman appreciate that as the Admiralty admit that the contention of these officers is perfectly just and correct, there is hardly any reason for paying them the bonus only from 1941, when the Admiralty admit, in the right hon. Gentleman's answer, that they are entitled to be paid from the day of the beginning of the war?

Mr. Alexander: I said that it was represented on their behalf that they had not been specifically notified of the change in 1927, although it was printed in the revised regulations. It was for this reason the Board of Admiralty made the very substantial concession indicated in my answer, and which operated from the date of the Treasury's approval.

Sir A. Southby: Does not the right hon. Gentleman realise that the Regulation itself specifically admits that these officers were entitled to receive a 25 per cent bonus when they were recalled for war

service, and having been recalled for war service, has he any reason for their being denied what the Regulation says they are entitled to?

Mr. Alexander: I have nothing to add to my answer.

Sir A. Southby: In view of the unsatisfactory nature of the reply, I beg to give notice that I intend to raise the matter on the Adjournment.

SHIP MISHAP (INQUIRY).

Colonel Arthur Evans: asked the First Lord of the Admiralty why orders were given to turn a ship, of whose name he has been informed, round in dangerous waters which resulted in the loss of the ship; what disciplinary action has been taken against those responsible; and whether arrangements have been made to make certain that such mistakes cannot be made in future?

Mr. Alexander: A full inquiry has been held, and steps have been taken to minimise the risk of recurrence. Fortunately this mishap did not result in the loss of the ship. Disciplinary action is under consideration.

Colonel Evans: Is the right hon. Gentleman aware that the master of the ship concerned protested against carrying out this order when it was given by a superior naval authority, and is he satisfied that the naval authority concerned had the experience necessary to hold a position of that kind in this port?

Mr. Alexander: The officers concerned were very experienced, and this particular accident would not have occurred if the instructions had been closely followed. Steps are being taken to prevent a recurrence.

Mr. Shinwell: Is it not true to say that many similar cases have been brought to the notice of the Admiralty by shipowners all over the country, and that no action has been taken?

Mr. Alexander: No, that is not true.

Mr. Shinwell: Does not that indicate that the right hon. Gentleman is not fully cognisant of all that is going on in his Department?

Mr. Alexander: I am afraid I cannot accept questions put in that way. It is not true that representations to the Admiralty lead to no action where such action is required to ensure that there is no departure from the carrying out of orders.

Mr. Thorne: Is it made known to the Admiralty what is in these ships when they go down?

Mr. Alexander: The cargoes?

Mr. Thorne: Yes, what kind of cargoes?

Mr. Alexander: Yes, that is known.

MERCHANT SHIPBUILDING (COST).

Sir P. Hurd: asked the First Lord of the Admiralty what is the cost of constructing a 5,000-ton merchant ship to-day as compared with the pre-war cost in 1938?

Mr. Alexander: For any merchant ship completing at the present time, the cost is about 20 per cent. higher than in 1938.

Oral Answers to Questions — JAMAICA (CONSTITUTION).

Mr. David Adams: asked the Under secretary of State for the Colonies whether it is the intention of His Majesty's Government to submit the suggestions which have been made for changes in the Constitution of Jamaica to the consideration of the House of Commons before these changes are put into operation?

Mr. George Hall: I would refer my hon. Friend to a reply which I gave to the hon. Member for Ipswich (Mr. Stokes) on 4th February, to the effect that if the constitutional changes are agreed upon locally, the Government will consider the question of the matter being considered by this House.

Mr. Adams: I take it that the Minister agrees with the proposals regarding the changes, which are of far-reaching importance to the Colonial Empire generally, and that therefore this House must have an opportunity of expressing its opinion?

Mr. Adams: asked the Under secretary of State for the Colonies whether a scheme has been prepared under the Colonial Welfare and Development Act, 1940, for the purpose of taking

a census in Jamaica; and, if so, when it is proposed that a census should be taken and what is its estimated cost?

Mr. Hall: No, Sir. A reply is awaited to the despatch on the subject of the Constitution which was addressed to the Governor of Jamaica on 7th March, a copy of which was placed in the Library of the House on 12th March.

Mr. Adams: Can the hon. Gentleman say whether it is intended to take a census or not?

Mr. Hall: We are waiting to hear from the Government as to whether the proposals are accepted in Jamaica.

Oral Answers to Questions — SIERRA LEONE (TRADE UNIONS).

Mr. Sorensen: asked the Undersecretary of State for the Colonies how many trade unions have been granted registration according to the provisions of the Sierra Leone Trade Union Ordinance; what is their approximate membership: how many trade unions have been refused registration; and whether the Sierra Leone Trade Union Congress has been granted registration?

Mr. George Hall: Seven trade unions, with a total approximate membership of 2,800 persons, have been registered under the Sierra Leone Trade Union Ordinance. No union under the title of "the Sierra Leone Trade Union Congress" has applied for registration. The only union which has been refused registration is a body called the "Sierra Leone Trades Union."

Mr. Sorensen: Can the hon. Gentleman say why a refusal was given to that particular body?

Mr. Hall: If the hon. Member will see me, I will have a talk with him.

Oral Answers to Questions — NORTHERN RHODESIAN COPPER-BELT (AFRICAN WOMEN).

Mr. Edmund Harvey: asked the Under-Secretary of State for the Colonies whether his attention has been called to the harmful effect on the lives of African women in the compounds of the Northern Rhodesian Copper belt of the absence of


any gardens, on which they might find healthy employment as they do in normal conditions, and the absence of provision for other suitable employment; and whether he will press for the provision of gardens at the compounds and also take steps to secure the services of qualified women welfare workers with knowledge of handicraft training and training in hygiene?

Mr. George Hall: As the hon. Member was informed on 12th March, further consideration will be given to the question of the provision of gardening facilities when the Governor's views are available. The question of medical and welfare work among African women and children on the Copperbelt is receiving the close attention of the Government of Northern Rhodesia. It is the intention to communicate with the Governor on certain points arising out of the recommendations of the Commission of Inquiry, and the suggestion that women welfare workers, qualified to give instruction in handicrafts, should be appointed to the Copperbelt will be commended to him for his favourable consideration.

Oral Answers to Questions — TRANSPORT.

ROAD REPAIRS.

Major Braithwaite: asked the Minister of Transport whether he is aware of the serious condition of many important roads in the country; and whether he will take steps to keep the repairs going, to enable road users to travel to their work without damaging their machines?

The Minister of Transport (Lieut. -Colonel Moore-Brabazon): I am aware of the heavy strain imposed upon the roads as a result of war conditions, but know of no important routes in the condition my hon. and gallant Friend implies. If he will tell me where they are, I will have them inspected.

ROAD ACCIDENTS.

Mr. Watkins: asked the Minister of Transport when the report will be published of the special investigation in selected areas of the causes of road accidents, as promised by his predecessor on 23rd January, 1940?

Lieut.-Colonel Moore-Brabazon: I cannot trace any promise to publish the reports made on this investigation, and publication is not contemplated. No extraordinary or unexpected factors were revealed. The war-time rise of accidents was clearly due to the difficulty which many people experience in adjusting themselves successfully to the special conditions prevailing.

Mr. Watkins: Will the right hon. and gallant Gentleman not reconsider publishing that report, so that individuals and organisations may make suggestions for reducing the very large number of road casualties?

Lieut.-Colonel Moore-Brabazon: I do not think that the publication of the report would be very helpful. I am quite ready to discuss it with my hon. Friend, and to let him read it.

USED MOTOR VEHICLES (PRICES).

Mr. Sorensen: asked the Minister of Transport whether he is aware that comparative prices for used motor vehicles have voluntarily been published for some years; and whether he will now consider fixing a maximum retail price on each year and model of used motor vehicles?

Lieut.-Colonel Moore-Brabazon: Owing to the increased difficulty and expense in obtaining repairs to private cars at the present time, a fair price for a vehicle depends to a much greater extent than formerly on its condition, and prices fixed on any other basis than the examination of individual vehicles would be too high for a car in poor condition or too low for one in good condition. Even the pre-war guides, which were, no doubt, based on an average of market conditions, indicated that the figures given required adjustment, according to the condition of the vehicle.

Mr. Sorensen: Does the right hon. and gallant Gentleman appreciate that, in spite of what he has stated, there is a good deal of concern about the unnecessary rise in prices of used motor vehicles? Will he consider some form of control?

Lieut.-Colonel Moore-Brabazon: Not yet.

Oral Answers to Questions — BIG BEN SILENT-MINUTE OBSERVANCE.

Sir W. Davison: asked the Prime Minister whether he is now prepared to


commend the Big Ben silent-minute observance to British citizens, so that, wherever possible, they should unite together in silent prayer for the speedy victory of our fight for freedom and justice?

The Lord Privy Seal (Mr. Attlee): Yes, Sir. My right hon. Friend the Prime Minister would be glad to think that those of us who wish to join in silent prayer for victory are combining to use the opportunity with which the B.B.C. has provided them.

Mr. McGovern: Is the idea to substitute prayer for military action?

Oral Answers to Questions — MERCANTILE MARINE (DECORATIONS).

Mr. Keeling: asked the Prime Minister which of the four Services, Navy, Army, Air Force and Mercantile Marine, is estimated to have had the largest war casualty rate; and whether he will consider advising His Majesty that a Merchant Service cross and medal be created or that officers and men of the Merchant Service be made eligible for naval decorations and medals?

Mr. Attlee: Arithmetical comparison of casualty rates must be misleading, but His Majesty's Government are fully mindful of the heavy loss of life incurred by the Merchant Navy, which is, in fact, comparable to that in the fighting Services. It would not be in the interests of the men of the Merchant Navy themselves, in the event of capture, to make them eligible for military awards when serving in a purely civilian capacity. They are already eligible for the gram of the George Cross and George Medal and of civil decorations for gallantry and for services arising out of enemy action, and for military awards when they are serving under the orders of the Royal Navy, as in the operations of Dunkirk, for which a number of military awards was made to the Service.

Mr. Keeling: Is my right hon. Friend aware of the extremely gallant actions which the Merchant Service have performed when not under naval orders? Will he consider instituting a further non-military decoration for such actions?

Mr. Attlee: There have been 488 civil awards made to the Merchant Navy

during the present war. I will bring the hon. Member's suggestion to the notice of the Prime Minister.

Oral Answers to Questions — DETERMINATION OF NEEDS ACT (REGULATIONS).

Mr. Tinker: asked the Prime Minister when the Regulations on the Determination of Needs Act will come before the House of Commons, as the Bill became law on 26th March, and it was understood that the Regulations would come before the House within one month of the passing of the Bill into law?

Mr. Attlee: The Determination of Needs Act, 1941, provides that the Regulations shall be made within one month from the passing of the Act and shall be laid before Parliament as soon as may be thereafter. The Regulations have been made, and will be laid before Parliament before the Recess.

Oral Answers to Questions — IRAQ (SITUATION).

Mr. Cocks: asked the Prime Minister whether he can make a statement on the position in Iraq and its bearing on the Anglo-Iraqi alliance?

Mr. Attlee: On every occasion that the Iraqi Army has interfered in the life of the country His Majesty's Government have not failed to notice the unfortunate results produced. They, therefore, regret the circumstances leading up to the present situation in Iraq, which they regard as entirely unconstitutional. The rights and obligations of His Majesty's Government under the Anglo-Iraqi Treaty of Alliance are, of course, unaffected by recent developments, and they are determined to ensure that the treaty is fully observed.

Mr. Cocks: Have the Government any evidence of Nazi intrigue behind recent proceedings in Irak? If so, are they pre pared to take such steps as are open to them in Irak to suppress that intrigue for ever?

Mr. Attlee: I must have notice of that question.

Oral Answers to Questions — POST-WAR RECONSTRUCTION.

Mr. De la Bère: asked the Minister without Portfolio whether he is now in a


position to make some statement of the progress the Government have made in formulating their reconstruction programme for the post-war period?

The Minister without Portfolio (Mr. Arthur Greenwood): I think it would be premature to make any statement at this stage. The formulation of a post-war reconstruction programme is not the work of a moment; many Departments are interested, and there is much preliminary investigation to be done. Preparatory studies are now proceeding under the auspices of the Committee of Ministers, of which I am chairman, and, as they are completed, it will be necessary for the Government to consider the questions of policy involved and to make such announcements as may prove to be necessary.

Mr. De la Bère: Will my right hon. Friend cease to explore zones of silence which are the aftermath of many yesterdays, now devoid of life, colour, courage and inspiration; and will he concentrate his energies on the reconstruction programme and the provision of plenty of work, which will give heart to the millions and is the only way to ensure success?

Mr. Greenwood: I should like to have that- question translated into language that I can understand.

Oral Answers to Questions — MINISTRY OF SUPPLY.

ADVERTISING.

Mr. Tinker: asked the Minister of Supply whether he has now completed his further consideration of the use of labour and material that is taken by advertising goods, etc., in newspapers and on hoardings; and is he now in a position to make a statement?

The Minister of Supply (Sir Andrew Duncan): Yes, Sir. Reductions have been made recently in the rations of paper for newspapers and periodicals; and an Order is about to be 'issued which will drastically restrict the use of paper for advertising by posters and circulars.

HOUSEHOLD WASTE (PROCESSING).

Mr. Evelyn Walkden: asked the Minister of Supply whether he has consulted with the Minister of Health as to

the number of local authorities that may have refuse destructors, or similar plant, that, by simple adaptation, might be converted for use as concentrators, and thereby intensify the processing of kitchen waste food for agricultural purposes?

Sir A. Duncan: About 20 local authorities have refuse disposal plant which could be used for the purpose indicated. This plant is fully occupied in dealing with slaughter house wastes, except in a few instances where the local authorities have been able to spare part of the plant for the treatment of kitchen waste.

Mr. Walkden: Do the right hon. Gentleman's principal advisers share the opinion of salvage enthusiasts that the present collection of kitchen waste by local authorities is almost negligible in the greater part of the country; and is he prepared to face the fact that he cannot supply -half enough concentrators in the next five years to satisfy the needs of local authorities?

Sir A. Duncan: No, Sir. I know of no foundation for the last statement. That the local authorities are not doing all they might do is possible; and we are at the present time investigating the situation with a view to taking action where necessary.

Mr. R. Gibson: Can the Minister say how many of the 20 plants are in Scotland?

Sir A. Duncan: That, I cannot say.

Viscountess Astor: Is it not true that some local authorities are absolutely disgraceful, and are doing nothing?

Sir A. Duncan: In judging that question, it is necessary to take into account circumstances of transport, labour, and other matters.

Mr. Thorne: Will the Minister draw attention to the plant they have in Birmingham?

COTTON IMPORTS.

Mr. Wootton-Davies: asked the Minister of Supply whether the £500,000 a year to be paid to the Manchester and Liverpool Cotton Association will be the total cost of purchasing all cotton imported?

Sir A. Duncan: Agreement has been reached in principle with the Manchester


and Liverpool Cotton Associations under which a company set up by them will purchase, sell and distribute imported cotton on behalf of the Government. Details are being worked out, but the fee of £500,000 will cover all purchasing, selling and distributive costs apart from certain disbursements on such items as storage and transport.

COMMERCIAL VEHICLES (SPARE PARTS).

Major Braithwaite: asked the Minister of Supply whether he is aware that many owners of commercial road wagons are unable to obtain spare parts for their machines, and in. consequence large numbers of transport lorries engaged on important Government work are laid up; and whether he will.take some steps to remedy this situation?

Sir A. Duncan: I am aware that owing to the heavy demands on the productive capacity of this country for Service purposes, certain spare parts for commercial vehicles are in short supply. Arrangements for improving the situation are, however, in hand.

IRON RAILINGS (WOODEN REPLACEMENT).

Mr. Parker: asked the Minister of Supply whether he is aware that wooden palings arc being put up to replace iron railings removed for scrap in many unnecessary cases, such as Leicester Square; and whether he will take action to prevent this waste of our timber supplies?

Sir A. Duncan: A close watch is being kept by the Timber Control on such uses of timber. In the case referred to by the hon. Member it was considered necessary on police grounds that the Square should be fenced off, but the material used is cleft fencing produced from underwood.

Mr. Parker: Is the Minister aware that Piccadilly, Manchester, a very similar square, was laid out before the war without any railings, and that they get on quite well without them?

Oral Answers to Questions — FOOD SUPPLIES.

HOTEL AND RESTAURANT MEALS.

Mr. Lipson: asked the Parliamentary Secretary to the Ministry of Food whether he will fix maximum prices for meals in hotels and restaurants to prevent unreasonable consumption of food, and wasteful

expenditure of money, which should be employed in the war effort?

The Parliamentary Secretary to the Ministry of Food (Major Lloyd George): No, Sir. The consumption of food in restaurants is already regulated under the provisions of the Food (Restrictions on Meals in Establishments) Order.

Mr. Lipson: Can the hon. and gallant Gentleman say whether non-rationed foods are also regulated, and is it not the consumption of non-rationed foods that ought to be cut down, as many hotels and restaurants may be turned into luxury feeding places and encourage consumption and waste?

Major Lloyd George: We have cut down the supplies of rationed foodstuffs, but the fixing of maximum prices might well lead to the consumption of more food.

VEGETABLES, COVENT GAKDEN.

Mr. Frankel: asked the Parliamentary Secretary to the Ministry of Food whether he is aware that in a Covent Garden warehouse there are 250 tons of vegetables which were bought by the Government in good condition, have since been allowed to go rotten, and are now unfit for human consumption; whether inquiries will be made as to whether there are other similar cases of gross waste; and what steps it is proposed to take to prevent their recurrence?

Major Lloyd George: The carrots to which my hon. Friend presumably refers form part of the emergency reserve held by the Government in a number of large towns. When they began to deteriorate and it was found that the London markets were abundantly stocked with carrots for human consumption in the hands of private traders, they were sold for stock feed. I cannot accept my hon. Friend's suggestion that these carrots were wasted. My Noble Friend is, however, making inquiries in regard to the general question.

Mr. Frankel: Is the hon. and gallant Gentleman aware that carrots are not the only vegetables involved in this wastage, which is still going on, and that the head of one of the biggest firms seriously involved in these allegations was only yesterday appointed to the new Vegetable Board; and will he have inquiries made into these allegations before this gentleman takes up his duties?

Major Lloyd George: While I cannot accept what the hon. Gentleman has said, I would refer him to the last part of my answer, that inquiries with regard to the general question are being pursued.

CHEESE RATION.

Mr. Mort: asked the Parliamentary Secretary to the Ministry of Food whether, in connection with his announcement that the extra allowance of cheese would be given to miners, agricultural labourers and others, he will inform the House what categories of workers come under the word '' others ''?

Major Lloyd George: The concession has been limited to underground miners and agricultural workers holding agricultural

Town.
Population.
Allocations of Manufacturers Meat (boneless equivalent) for the 4 weeks ended 29th March, 1941.


To Group I Manufacturers.
To Pork Butchers.
Total.
Per head of Population.




cwts.
cwts.
cwts.
oz.


Lincoln
…
…
70,796
175
77
252
6·4


Scunthorpe
…
…
50,163
47
31
78
2·8


Grimsby
…
…
90,561
11
307
318
6·3


Peterborough
…
…
75,272
57
104
161
3·8


Grantham
…
…
27,074
—
138
138
9·1


Stamford
…
…
19,859
10
102
112
10·1


Louth
…
…
…
26,258
7
105
112
7·6


The whole of the production of any Group I Manufacturer is not necessarily sold in the town where he manufactures, and, on the other hand, products from other Group I manufacturers may come in to a town in any quantity.

BUSINESS OF THE HOUSE.

Mr. Lees-Smith (by Private Notice): May I ask the Prime Minister what is to be the procedure with regard to Business after Easter?

Mr. Attlee: I will also state the Business for to-day. The Prime Minister will move the Resolution of thanks to all ranks of His Majesty's Forces in the Middle East and those at home who have contributed to their victories, and afterwards we desire to obtain the Committee stage of the outstanding Budget Resolutions, and of the National Loans Ways and Means Resolution, on which a separate Bill will be founded.
We also desire to take the Report stage of the National Loans Resolution formally on the next Sitting Day, so that the Bill may be brought in

unemployment insurance cards. The only other persons included are vegetarians.

MEAT ALLOCATION.

Mr. Liddall: asked the Parliamentary Secretary to the Ministry of Food the allocation of Group 1 manufacturing meat to Lincoln City and Scunthorpe, respectively, compared with the allocation of like meat to Grimsby, Peterborough, Grantham, Stamford and Louth for the four weeks ended 29th March, 1941?

Major Lloyd George: As the reply contains a tabular statement, I will, with permission, circulate it in the OFFICIAL REPORT.

Following is the statement:

The Business to be considered after the Easter Recess will be as follows:

On the first Sitting Day—Motions to approve the continuance in force of Proclamations made under the Government of India Act.

On the second Sitting Day—Report stage of the Budget Resolutions.

On the third Sitting Day—Second Reading the Liabilities (War-time Adjustment) Bill [Lords].

During the week we hope to make progress with the National Loans Bill and with the Chartered and Other Bodies (Temporary Provisions) Bill [Lords].

Mr. Hore-Belisha: In view of the portentous events which are occurring, would the right hon. Gentleman and the Government consider a revision of that Business


on the resumption of the House after Easter? My right hon. Friend the Prime Minister is moving a Motion to-day which will command unanimity, and it would be a pity to widen its scope in any way in discussion. As we have had no statement from the Government on the recent developments, and the House would be willing to possess itself in patience until we meet again, could the first two days be devoted to a general discussion of the progress of the war in the light of the facts which will then have become clarified?

The Prime Minister (Mr. Churchill): Without committing the Government to any direct re-arrangement of Parliament any Business, it is evident that a further discussion on the war situation might be appropriate to our Business after the Easter Recess.

Ordered,
That the Proceedings of the Committee of Ways and Means be exempted, at this day's Sitting, from the provisions of the Standing Order (Sittings of the House)." —[The Prime Minister.]

MESSAGE FROM THE LORDS.

That they have agreed to—

Army and Air Force (Annual) Bill, Isle of Man (Detention) Bill, without Amendment.

Preamble

The House being met, the Clerk at the Table informed the House of the unavoidable absence, through indisposition, of Mr. SPEAKER from this Day's Sitting. Whereupon Sir DENNIS HERBERT, the CHAIRMAN of WAYS AND MEANS, proceeded, to the Table, and, after Prayers, took the Chair as DEPUTY-SPEAKER, pursuant to the Standing Order.

WAR SITUATION.

MIDDLE EAST VICTORIES.

THANKS OF THE HOUSE.

The Prime Minister (Mr. Churchill): I beg to move,
That this House on the occasion of the recent victories by sea, land and air in North Africa, Greece and the Mediterranean, records with gratitude its high appreciation of the services of all ranks of His Majesty's Forces in these brilliant operations, and also of those who by their labours and fortitude at home have furnished the means which made these successes possible.
We are now able and indeed required to take a more general view of the war than when this Resolution of thanks was first conceived. The loss of Benghazi and the withdrawal imposed upon us by the incursion into Cyrenaica are injurious chiefly on account of the valuable airfields around Benghazi which have now passed into the enemy's hands. Apart from this important aspect, we should have been content, in view of the danger which was growing in the Balkans, to have halted our original advance at Tobruk. The rout of the Italians, however, made it possible to gain a good deal of ground easily and cheaply, and it was thought worth while to do this, although, in consequence of other obligations already beginning to descend upon us, only comparatively light forces could be employed to hold what was won. The movement of the German air forces and armoured troops from Italy and Sicily into Tripoli had begun even before we took Benghazi, and our submarines and aircraft have taken a steady toll of the transport-carrying German troops and vehicles. But that has not prevented—and could not prevent—their building of a strong armoured force on the African shore. With this force they have made a rapid attack in greater strength than our commanders expected at so early a date, and we have fallen back upon stronger positions and more defensible country. I cannot attempt to forecast what the course of the fighting in Cyrenaica will be. It is clear, however, that military considerations alone must guide our generals and that these problems must in no way be complicated by what are called prestige values or by consideration of public opinion. Now that the Germans are using their armoured strength in Cyrenaica we must expect much hard and severe fighting, not only for the

defence of Cyrenaica, but for the defence of Egypt.
It is fortunate, therefore, that the Italian collapse in Eritrea and Ethiopia, and in British and Italian Somaliland, is liberating progressively very substantial forces and masses of transport to reinforce the Army of the Nile. This sudden darkening of the scene in Cyrenaica in no way detracts from the merit of the brilliant campaigns which have destroyed the Italian Empire in North East Africa, nor does it in any way diminish our gratitude to the troops or our confidence in the commanders who have led them. On the contrary, we shall show that we are no fair-weather friends and that our hearts go out to our Armies even more warmly when they are in hard action than when they are sailing forward on the flowing tide of success. I took occasion a fortnight ago to warn the public that an unbroken continuance of success could not be hoped for, that reverses as well as victories must be expected, that we must be ready, as indeed we always are ready, to take the rough with the smooth. Since I used this language other notable episodes have been added to those that have gone before. Keren was stormed after hard fighting, which cost us about 4,000 casualties, and the main resistance of the Italian army in Eritrea was overcome. Foremost in all this fighting in Eritrea have been our Indian troops, who have, at all points and on all occasions sustained the martial reputation of the sons of Hindustan.
After the fall of Keren the Army advanced. Asmara has surrendered and the port of Massawa is in our hands. The Red Sea has been virtually cleared of enemy warships, which is a matter of considerable and even far-reaching convenience. Harar has fallen, and our troops have entered and taken charge of Addis Ababa itself. The Duke of Aosta's army has retreated into the mountains, where it is being attended upon by the patriot forces of Ethiopia. The complete destruction or capture of all Italian forces in Abyssinia, with a corresponding immediate relief to our operations elsewhere, may reasonably be expected. Besides these land operations, the Royal Navy under Admiral Cunningham, splendidly aided by the Fleet Air Arm and the Royal Air Force, have gained the important sea battle of Matapan, decisively breaking the Italian naval power in the


Mediterranean. When we look back upon the forlorn position in which we were left in the Middle East by the French collapse, when we remember that not only were our Forces in the Nile Valley outnumbered by four or five to one by the Italian armies, that we could not contemplate without anxiety the defence of Nairobi, Khartum, Cairo, Alexandria, Jerusalem and the Suez Canal, and that this situation has been marvellously transformed, that we have taken more Italian prisoners than we had troops in the country, that the British Empire has stood alone and conquered alone, except for the aid of the gallant Free French and Belgian Forces, who, although few in number, have borne their part—when all this recalls itself to our minds amid the unrelenting pressure of events, I feel confident that I can commend this Resolution to the House and that it will be most heartily and enthusiastically acclaimed.
I now turn from Cyrenaica and Abyssinia to the formidable struggle which has followed the German invasion of the Balkan Peninsula, with all its attendant savagery and science. For some months past we have witnessed and watched with growing concern the German absorption of Hungary, the occupation of Rumania and the seduction and occupation of Bulgaria. Step by step we have seen this movement of the German military power to the South and South-East of Europe. A remorseless accumulation of German armoured and motorised divisions, and of aircraft, has been in progress in all these three countries for months, and at length we find that the Greeks and the Southern Slavs, nations and States which never wished to take part in the war and neither of which was capable of doing the slightest injury to Germany, must now fight to the death for their freedom and for the lands of their fathers.
Until Greece was treacherously and suddenly invaded in November last at the behest of the base Italian dictator, she had observed a meticulous neutrality. It may be that the sentiments of her people, like those of all free and honourable men in every country, were on our side but nothing could have been more correct than the behaviour of her Government in diplomatic conduct and relations. We had no contacts or engagements of a military character with the Greek Government.
Although there were islands like Crete, of the highest consequence to us and although we had given Greece our guarantee against aggression, we abstained from the slightest intrusion upon her. It was only when she appealed to us for aid against the Italian invader that we gave whatever support in the air and in the matter of supplies was possible.
All this time, the Germans continued to lavish friendly assurances upon Greece and to toy with the idea of a commercial treaty. German high officials, both in Athens and Berlin, expressed their disapproval of the Italian invasion and offered their sympathy to Greece. Meanwhile, since the beginning of December the movements of German forces through Hungary and Roumania towards Bulgaria became apparent to all. More than two months ago, by the traitorous connivance of the Bulgarian King and Government, the advance parties of the German Air Force, in plain clothes, were gradually admitted to Bulgaria and took possession of the Bulgarian airfields. Many thousands of German airmen, soldiers and political police had already percolated into Bulgaria and were ensconced in key positions before the actual announcement of the accession of Bulgaria to the Axis was made. German troops then began to pour openly into Bulgaria in very large numbers. One of the direct objectives of these forces was, plainly, Salonika, which I may mention, they have entered at 4 o'clock this morning.
It has never been our policy or our interest to see the war carried into the Balkan Peninsula. In the middle of February, we sent our Foreign Secretary and the Chief of the Imperial General Staff to the Middle East, in order to see whether anything could be done to form a united defensive front in the Balkans They went to Athens. They went to Ankara. They would have gone to Belgrade, but they were refused permission by the government of Prince Paul. Of course, if these three threatened States had stood together they could have had at their disposal 60 or 70 divisions which, if a good combined plan had been made and if prompt united action had been taken in time, might have confronted the Germans with a project of resistance which might well have deterred them altogether and must, in any case, have long delayed them, having regard to the


mountainous and broken character of the country to be defended and the limits of the communications available in the various countries through which the German armies had forced or intrigued their way.
Although we were most anxious to promote such a defensive front by which alone the peace of the Balkans could be maintained, we were determined not to urge the Greeks, already at grips with the Italians, upon any course contrary to their desires or judgment. The support which we can give to the peoples who are fighting, or are ready to fight, for freedom in the Balkans and in Turkey, is necessarily limited at the present time, and we did not wish to take the responsibility of pressing the Greeks to engage in a conflict with the new and terrible foe gathering upon their frontiers. However, on the first occasion when the Foreign Secretary and the Chief of the Imperial General Staff met the Greek King and Prime Minister, the Prime Minister declared spontaneously on behalf of the Government that Greece was resolved, at all costs, to defend her freedom and native soil against any aggressor, and that even if they were left wholly unsupported by Great Britain, or by their neighbours Turkey and Yugoslavia, they would, nevertheless, remain faithful to their alliance with Great Britain, which came into play at the opening of the Italian invasion, and that they would fight to the death against both Italy and Germany.
This being so, it seemed that our duty was clear. We were bound in honour to give them all the aid in our power. If they were resolved to face the might and fury of the Huns, we had no doubts but that we should share their ordeal and that the soldiers of the British Empire must stand in the line with them. We were advised by our generals on the spot, the Chief of the Imperial General Staff, and Generals Wavell and Papagos, both victorious commanders-in-chief, that a sound military plan, giving good prospects of success, could be made. Of course, in all these matters there is hazard and in this case, as anyone can see, without particularizing unduly, there was for us a double hazard. It remains to be seen how well those opposing risks and duties have been judged, but of this I am sure, that there is no less likely way of winning

a war than to adhere pedantically to the maxim of "Safety first." Therefore, in the first weeks of March we entered into a military agreement with the Greeks, and the considerable movement of British and Imperial troops and supplies which has since developed began to take place. The House would very rightly reprove me if I entered into any details, or if while this widespread battle is going on I attempted in any way to discuss either the situation or its prospects.
I therefore turn to the story of Yugoslavia. This valiant, steadfast people, whose history for centuries has been a struggle for life, and who owe their survival to their mountains and to their fighting qualities, made every endeavour to placate the Nazi monster. If they had made common cause with the Greeks when the Greeks, having been attacked by Italy, hurled back the invaders, the complete destruction of the Italian armies in Albania could certainly and swiftly have been achieved long before the German forces could have reached the theatre of war. And even in January and February of this year, this extraordinary military opportunity was still open. But the Government of Prince Paul, untaught by the fate of so many of the smaller countries of Europe, not only observed the strictest neutrality and refused even to enter into effective Staff conversations with Greece or with Turkey or with us, but hugged the delusion that they could preserve their independence by patching up some sort of pact or compromise with Hitler. Once again we saw the odious German poisoning technique employed. In this case, however, it was to the Government rather than to the nation that the doses and the inoculations were administered. The process was not hurried. Why should it have been? All the time the German armies and air force were massing in Bulgaria. From a few handfuls of tourists, admiring the beauties of the Bulgarian landscape in the wintry weather, the German forces grew to 7, 12, 20, and finally to 25 divisions. Presently, the weak and unfortunate Prince, and afterwards his Ministers, were summoned, like others before them, to Herr Hitler's footstool, and a pact was signed which would have given Germany complete control not only over the body but over the soul of the Slav nation. Then at last the people of Yugo-


slavia saw their peril, and with a universal spasm of revolt and national resurgence very similar to that which in 1808 convulsed and glorified the people of Spain, they swept from power those who were leading them into a shameful tutelage, and resolved at the eleventh hour to guard their freedom and their honour with their lives. All this happened only a fortnight ago.
A boa constrictor who had already covered his prey with his foul saliva and then had it suddenly wrested from his coils, would be in an amiable mood compared with Hitler, Goering, Ribbentrop and the rest of the Nazi gang when they experienced this bitter disappointment. A frightful vengeance was vowed against the Southern Slavs. Rapid, perhaps hurried, redispositions were made of the German forces and German diplomacy. Hungary was offered large territorial gains to become the accomplice in the assault upon a friendly neighbour with whom she had just signed a solemn pact of friendship and non-aggression. Count Teleki preferred to take his own life rather than join in such a deed of shame. A heavy forward movement of the German armies already gathered in and dominating Austria was set in motion through Hungary to the Northern frontier of Yugoslavia. A ferocious howl of hatred from the supreme miscreant was the signal for the actual invasion. The open city of Belgrade was laid in ashes, and at the same time a tremendous drive by the German armoured forces which had been so improvidently allowed to gather in Bulgaria was launched Westward into Southern Serbia. And it no longer being worth while to keep up the farce of love for Greece, other powerful forces rolled forward into Greece, where they were at once unflinchingly encountered and have already sustained more than one bloody repulse at the hands of that heroic Army. The British and Imperial troops have not up to the present been engaged. Further than this I cannot, at the moment, go. Further than this I cannot attempt to carry the tale.
Therefore, I turn for a few moments to the larger aspects of the war. I must first speak of France and of the French people, to whom in their sorrows we are united not only by memories but by living ties. I welcome cordially the declaration of Marshal Petain that France could never

act against her former Ally or go to war with her former Ally. Such a course so insensate, so unnatural and, on lower grounds, so improvident, might well— though, of course, it is not for me to speak for any Government but our own— alienate from France for long years the sympathies and support of the American democracy. I am sure that the French nation would, with whatever means of expression are left to them, repudiate such a shameful deed. We must, however, realise that the Government of Vichy is in a great many matters, though happily not in all, in the hands of Herr Hitler acting daily through the Armistice Commission at Wiesbaden. Two million Frenchmen are prisoners in German hands. A great part of the food supply of France has been seized by Germany. Both prisoners and food can be doled out month by month in return for hostile propaganda or unfriendly action against Great Britain. Or again, the cost of the German occupation of France, for which a cruel and exorbitant toll is exacted, may be raised still further as a punishment for any manifestations, of sympathy with us. Admiral Darlan tells us that the Germans have been generous in their treatment of France. All the information which we receive both from occupied and unoccupied France, makes me very doubtful whether the mass of the French people would endorse that strange and somewhat sinister tribute. However, the generosity of the German treatment of France is a matter for Frenchmen to judge.
But I wish to make it clear that we must maintain our blockade against Germany and those rights of contraband control at sea, which have never been disputed or denied to any. belligerent, and which a year ago France was exercising to the full with us. Some time ago we were ready to enter upon economic negotiations with the French. But any chance of fruitful negotiation was nipped in the bud by the generous Germans, and imperative orders were given from Wiesbaden to the Government of Vichy to break off all contact with us. Nevertheless, we have in practice allowed very considerable quantities of food to go into France out of our sincere desire to spare the French people every hardship in our power. When, however, it comes to thousands of tons of rubber and other vital war materials which pass, as we know, directly


to the German armies, we are bound, even at the risk of collisions with French warships at sea, to enforce our rights as recognised by international law. There is one other form of action into which the Vichy Government might be led by the dictation of Germany, namely, the sending of powerful war vessels, which are unfinished or damaged, back from the French African ports to ports in Metropolitan France which are either under the control of the Germans, or may at very short notice fall under their control. Such movements of French war vessels from Africa to France would alter the balance of naval power, and would thus prejudice the interests of the United States as well as our own. Therefore, I trust that such incidents will be avoided, or, if they cannot be avoided, that the consequences which follow from them will be understood and fairly judged by the French nation, for whose cause we are contending no less than for our own.
I am glad to be able to report to the House a continued and marked improvement in the relative strength of the Royal Air Force as compared with that of Germany; also I draw attention to the remarkable increase in its actual strength and in its bomb-dropping capacity, and to the marked augmentation in the power and size of the bombs which we shall be using in even greater numbers. The sorties which we are now accustomed to make upon German harbours and cities are increasing in numbers of aircraft employed and in the weight of the discharge with every month that passes, and in some cases we have already in our raids exceeded in severity anything which any single town has in a single night experienced over here. At the same time, there is a sensible improvement in our means of dealing with German raids upon this Island, and a very great measure of security has been given to this country in day-time—and we are glad that the days are lengthening. But now the moonlight periods are also looked forward to by the Royal Air Force as an opportunity for inflicting severe deterrent losses upon the raiders, as well as for striking hard at the enemy in his own territory. The fact that our technical advisers welcome the light—daylight, moonlight, starlight— and that we do not rely for our protection on darkness, clouds and mists, as would

have been the case some time ago, is pregnant with hope and meaning. But, of course, all these tendencies are only in their early stages, and I forbear to enlarge upon them.
But, after all, everything turns upon the Battle of the Atlantic, which is proceeding with growing intensity on both sides. Our losses in ships and tonnage are very heavy, and vast as.are the shipping resources which we control, these losses could not continue indefinitely without seriously affecting our war effort and our means of subsistence. It is no answer to say that we have inflicted upon the Germans and Italians a far higher proportion of loss compared with the size of their merchant fleets and the fleeting opportunities they offer us, than they have upon us, with our world-wide traffic continually maintained. We have, in fact, sunk, captured or seen scuttled over 2,300,000 tons of German and Italian shipping. But we have ourselves lost since the beginning of the war nearly 4,000,000 tons of British tonnage. As against that, we have gained under the British flag over 3,000,000 of foreign or newly-constructed tonnage, not counting the considerable foreign tonnage which has also come under our control. Therefore, at the moment our enormous fleets sail the seas without any serious or obvious diminution, as far as the number of ships is concerned.
But what is to happen in the future if these losses continue at the present rate? Where are we to find another three or four million tons to fill the gap which is being created and carry us on through 1942? We are building merchant ships upon a very considerable scale and to the utmost of our ability, having regard to other calls upon our labour. We are also making a most strenuous effort to make ready for sea the large number of vessels which have been damaged by the enemy and the still larger number which have been damaged by the winter gales. We are doing our utmost to accelerate the turn-round of our ships, remembering— this is a striking figure—that even 10 days' saving on turn-round on our immense fleets is equal to a reinforcement of 5,000,000 tons of imports in a single year. I can assure the House that all the energy and contrivance of which we are capable have been and will continue to be devoted to these purposes, and we are


already conscious of substantial results. But, when all is said and done, the only way in which we can get through the year 1942 without a very sensible contraction of our war effort is by another gigantic building of merchant ships in the United States similar to that prodigy of output accomplished by the Americans in 1918. All this has been in train in the United States for many months past. There has now been a very large extension of the programmes, and we have the assurance that several millions of tons of American new-built shipping will be available for the common struggle during the course of the next year. Here, then, is the assurance upon which we may count for the staying power without which it will not be possible to save the world from the criminals who assail its future.
The Battle of the Atlantic must, however, be won, not only in the factories and shipyards, but upon the blue water. I am confident that we shall succeed in coping with the air attacks which are made upon the shipping in the Western and North-Western approaches. I hope that eventually the inhabitants of the sister Island may realise that it is as much in their interest as in ours that their ports and air fields should be available for the naval and air forces which must operate ever further into the Atlantic. But, while I am hopeful that we shall gain mastery over the air attack upon our shipping, the U-boats and the surface raiders, ranging ever farther to the Westward, ever nearer to the shores of the United States, constitute a menace which must be overcome if the life of Britain is not to be endangered and if the purposes to which the Government and people of the United States have devoted themselves are not to be frustrated. We shall, of course, make every effort in our power. The defeat of the U-boats and of the surface raiders has been proved to be entirely a question of adequate escorts for our convoys. It would be indeed disastrous if the great masses of weapons, munitions and instruments of war of all kinds, made with the toil and skill of American hands, at the cost of the United States, and loaned to us under the Aid to Britain Act, were to sink into the depths of the ocean and never reach the hard-pressed fighting line. That would be a result lamentable to us over here, and I cannot believe that it would be found

acceptable to the proud and resolute people of the United States. Indeed, I am now authorised to state that 10 United States Revenue cutters, fast vessels of about 2,000 tons displacement, with a fine armament and a very wide range of endurance, have already been placed at our disposal by the United States Government and will soon be in action. These vessels, originally designed to enforce prohibition, will now serve an even higher purpose.
It is, of course, very hazardous to try to forecast in what direction or directions Hitler will employ his military machine in the present year. He may at any time attempt the invasion of this Island. That is an ordeal from which we shall not shrink. At the present moment he is driving South and South-East through the Balkans, and at any moment he may turn upon Turkey. But there are many signs which point to a Nazi attempt to secure the granary of the Ukraine and the oil fields of the Caucasus as a German means of gaining the resources wherewith to wear down the English-speaking world. All this is speculation. I will say only one thing more. Once we have gained the Battle of the Atlantic and are certain of the constant flow of American supplies which is being prepared for us, then, however far Hitler may go, or whatever new millions and scores of millions he may lap in misery, he may be sure that, armed with the sword of retributive justice, we shall be on his track.

Mr. Lees-Smith: I have been asked by hon. Members sitting near me to say a few words expressing their complete agreement with this Motion. I shall confine myself to the Motion and shall not enter into the wider survey of the war which the Prime Minister has made. There are only two points in regard to the Motion which I would call to the attention of the House. The linking of this vote of thanks to our Navy, Army and Air Force with the campaign in Africa and in the Mediterranean appears to me to be based on what I would venture to describe as profound strategical insight, because I take it that it is now clear that the campaign in Africa, and particularly the campaign for the defence of Egypt, whatever may happen in the Balkans and elsewhere, is already bound to be one of the three or four decisive turning-points in the history of the war.
We may have, as the Prime Minister said, our dark and bright moments, but it has always been fairly clear that Hitler's best chance of success in this war was the conquest of Egypt. Had he done that, we should have lost Alexandria, which is our only base for a fleet; we should have had to clear out of the Mediterranean; he would have had opened to him the oil of Irak and Iran and the raw materials of the near East; and he would have been able to get round the back of the British blockade. In these circumstances he may very well have so dug himself in that it is difficult to know when we could have pushed him out, and he would have had his best prospects of turning the war into a stalemate, which, with his control over Europe, would in fact have been a victory. That prospect was destroyed by our troops, who have shown in that process that the modern members of our nation have a sheer fighting power which has never been surpassed in the whole history of war.
There is only one other feature of the Motion which I would call to the attention of the House. I am pleased to notice that the thanks to the Armed Forces are linked up with thanks to the British people as a whole. The campaign in Africa and the Mediterranean has, in fact, been a test of the quality of the entire nation. It has been a great industrial operation. I recollect that in reading the accounts of the defence of Sidi Barrani it was pointed out that the troops relied not only on their own endurance, but to an equal extent on the complete reliability of the tanks, on which their lives depended, made by ordinary British workers. The tanks did not let them down, and the men who made them are among the victors of Africa. Putting it all together—the workers in the workshops, the soldiers in the field, the army commanders and the Higher Command—the experience of the last few months entitles us to say that the British people under our form of democratic government have reached a higher level of practical efficiency than we have ever before achieved.
I should like to mention something which has greatly impressed me. I think that our thanks are due to another great section. After the battle of Dunkirk we had here only four fully equipped divisions, while Hitler had over 200. Practically the whole world thought we

were going the same way as France. In that hour of peril, however, our troops were deliberately sent to Egypt, and our Air Force and Fleet in the Mediterranean were reinforced. In my opinion that decision was one of the turning-points of the war. It showed that a number of men sitting quietly round a table in London may frequently have to come to a determination which, for courage in its own sphere, is as great as that needed on the battlefield itself. The thanks of the nation are due to the group of men who made that decision. These are some of the reasons why my hon. Friends wish to associate themselves completely with this Motion.

Sir Percy Harris: I, too, would like to be associated with this Motion. I will not attempt to say anything about the solemn but impressive statement made by the Prime Minister except to thank him for its fullness and for the completeness of his survey. I want to assure him that he has the complete confidence, not only of the House of Commons, but of the nation. We shall have many black moments before this great war is finished, but we believe that both in adversity and success we have in him a great leader whom the nation follows. In moving this Motion he paid an eloquent tribute to the three Fighting Services, but they will be the first to admit that a great part of their success has been due to his wise leadership and tenacious courage.
A characteristic of the war during the last few months has been the loyal cooperation of the three Fighting Services. I would like to refer to one significant feature of the Libyan or North African campaign; that is the presence of the Australian and New Zealand troops. In the last war they won immortal fame as the Anzacs. Many people, particularly our enemies, thought that after they had obtained their complete political independence we should not be able to look to them for the same co-operation. Facts have proved otherwise. They have immortalised themselves in the trackless desert as they did in the last war. Another feature to which I am glad the Prime Minister referred is the splendid courage shown by our Indian troops in East Africa, and also by our Colonial troops who came from almost every coastal country round


Africa. Their deeds of courage show that they are imbued with the same spirit as our own British troops. One of the most remarkable feats of the last few weeks has been the march of the South Africans of 700 miles in one month. It was an almost unexampled feat in military history. We have to recognise that that was made possible by that great friend of the British Commonwealth, General Smuts.
However, in praising these troops, who have had much well-deserved praise, we must not forget our own soldiers from the Home Counties, from England and Wales, Ireland and Scotland, nor those splendid men from London, who on almost every battlefield are bearing their share with our Dominion troops. We all know that all this work would have been impossible, as the Prime Minister has so wisely said, had it not been for the work of the "silent service." We have had tremendous evidence of the influence of sea power. The Battle of Cape Matapan will, I venture to prophesy, prove to be one of the decisive sea battles of history. And while we are praising this more recent event, we must not forget some of the remarkable achievements of last summer. There was the battle of the River Plate, which gave the first proof that the naval power of Britain was living up to its prestige. Nor must we forget the heroic deeds which will be associated for all time with Dunkirk and made recent victory possible. The dictators have alleged that democracy is decadent. Well, we have proved that democracy, a free people, can stand up to these new forms of government with courage. As long as we have military leaders like Wavell, the two Cunninghams, Dill, Portal, Long more and many others who have won their spurs during the last 12 months the British tradition of courage and tenacity can be relied on.
I should like to say one word about the home front. I am glad the Prime Minister referred to it in his speech. In my view it is going to be the decisive factor in the war. Not only must we produce the planes, tanks and guns, but everything depends upon our own courage, the courage and determination of die civilian population. I have no use for pessimists, and I have no use, either, for optimists. The optimist waves the flag at the first victory, but as soon as a re-

verse comes is depressed. In the same way the pessimist, when the tide turns, is full of depression. We must be calm in adversity as well as restrained in success. Our Fighting Services are all right, and I can assure the Prime Minister that he can rely upon Parliament and the nation to stand by him whatever the course of the war, whatever the events of the next few months.

Mr. Hore-Belisha: Our gratitude to the forces and the Mercantile Marine, which is expressed in this Motion, is not entirely dependent upon the vicissitudes of war. It is constant. There may be good news and there may be bad news, but in all circumstances we must prove worthy of the deeds which they have done, and which it is the intention of this Motion to record. When things are ill, above all we must preserve our morale, and never for one instant waver in our resolution. That is the best form in which we can express to the Services what we feel. Nor must it be forgotten that what' ever the outcome of the most recent developments may be, it is to the Greeks that an immortal debt is owed. They opened the path to the victories in Africa, and perhaps the highest tribute that has been paid to them is that which came from General Simovitch in Yugoslavia when he said that their courage had pointed the way to Yugoslav honour. The Greeks are doing to-day deeds as imperishable as those which won them renown 2,000 years ago against the Persian Empire, and more recently against another Empire which, it is to be hoped, will this time be on their side and on ours—I refer, of course, to Turkey. It certainly will be if the feelings of the Turkish people are taken into account.
One can understand the anxiety and the burden now being borne by the Prime Minister, and the whole House will be with him at this time. He sustained the nation in an even more difficult hour than this, and he need in no sense feel discouraged, for the cause that we uphold with the Greeks and the Yugoslavs is imperishable. He has uttered some grave words on wider subjects which it would not be relevant to this Motion to examine; and, indeed, it would take away from the effect of the intention of this Motion if they were to be discussed. I would, therefore, only like to say to the Prime Minister that during the Recess; he and the Govern-


ment will carry all our good wishes and our most supreme confidence in ultimate victory.

Mr. Tinker: I have just one word to say on the Prime Minister's statement, perhaps the gravest we have had since he took over events in May last. I refer to Eire. I want to take this opportunity—

Mr. Deputy-Speaker (Sir Dennis Herbert): The Prime Minister made a statement, but there is a Motion before the House, and I think it is my duty—and I think it will have the approval of the House—to ask hon. Member? to keep strictly to the Motion which is before the House.

Mr. Tinker: I am doing that, and I am trying to be helpful in this matter. The Prime Minister made a brief reference to Eire, and appealed to her to help us by giving us the use of her ports, and I think an opportunity like that ought not to be missed in the House of Commons. I have had a number of meetings on this matter in my constituency, and I want to convey to the Prime Minister the grave feelings of Irishmen in this country about Eire. I want to assist him in this appeal which he has made this morning. I want to ask Ireland, in this hour of the gravest crisis in this country, to come forward and help us to bring about victory. I make this appeal as an Irishman in the House of Commons appealing to brother Irishmen to help us in this way.

Viscountess Astor: In offering one word of support to the Prime Minister, I feel that it must be almost frightening for him to realise the complete faith which the people of this country have in him. That in itself must be a tremendous burden. I also want to say to him that I hope, no matter what may arise, he will never doubt that all sections of the community, even some who would not have been behind him except in war, are completely behind him now that the war is on. He has referred to the turn-round of our ships, and I do not want to get on to any controversial subject. When it comes to the Fighting Services it is all right, but I would ask him to remember that there is a terrific fight that has to go on here at home, particularly in towns that have been "Blitzed." I know the Prime Minister

is looking after all the fighting services, but there is one thing which I think the Government have not really faced up to with that determination which they might have shown. I speak with great feeling, having come through one of the most terrible "Blitzes" —

Mr. Deputy-Speaker: The hon. lady is now getting away from the terms of the Motion which is before us.

Viscountess Astor: I am sorry, but this was really to do with the troops. While they are righting abroad the one thing that would help and console them would be the knowledge that everything was being done at home for those they had left behind. I hope that the Prime Minister will remember the people at home with the same diligence, as he remembers the Fighting Forces.
I was never prouder in my life than I have been lately of my American blood. The Prime Minister and I have something—not much, but something—in common. He is half American, and I am wholly American. I receive many letters from the country of my birth, and it makes me proud that we, who have Anglo-Saxon blood, know that nothing on earth and no foreign-born person can do anything that will affect us. I know that the Prime Minister's speech has not been very cheerful, but it has not been a speech which could alarm anybody, because we, who have that blood in our veins, know that we are fighting not merely a local or an international war, but are fighting a war for justice and mercy. When we fight that battle we have not only our people behind us but the right thinking people of all countries are with us. I am sorry for our reverses, but I am not in the least dismayed. I am sure that the whole nation is deeply grateful to the United States for standing by us at this time.

Captain Poole: The Prime Minister referred to the Battle of the Atlantic. I feel that it is laid upon me on every conceivable occasion to say one thing which I have been saying for a long time in this country, and which has a bearing upon the Battle of the Atlantic. We pay our tribute to those who have borne perhaps the most dangerous share in the war, our merchant seamen, and if we mean anything by this Motion, we must see to it that we place no further hazards in the way of those men who daily cross the Atlantic to fight the battle.
Because of these facts, I would ask the Prime Minister whether he will see to it that everything is done in connection with the shipping industry to ensure that no further hazards are placed in the way of our merchant seamen. I refer to only one aspect of the question, which is the totally unnecessary disclosure of shipping movements. I appeal to the Prime Minister, as I have appealed to heads of other Departments, to institute an inquiry and call for evidence from those who can supply it to show that there is at the present time a totally unnecessary disclosure of those movements.

The Prime Minister: I do not want us to stray from the Motion, but I would tell the hon. and gallant Member that some time ago a very careful and thorough investigation was begun touching the very question he has raised, and that it is being carried out at the present time.

Captain Poole: Captain Poole rose —

Mr. Deputy-Speaker: I must ask the hon. and gallant Member not to stray any further from the strict terms of the Motion. I am sure he realises that to do so will spoil the effect of the Debate that we have already had.

Captain Poole: I thank you, Mr. Deputy-Speaker, and I will not pursue the matter any further. I would be the last to want to detract from the terms of this Motion. I am sure that all of us would like the Prime Minister to go away from the House feeling that we have endorsed to the full all that he has said, that we go with him all the way he has gone, and that we shall continue to travel that road, whether it be rough or smooth, until victory is secured.

Question put, and agreed to nemine contradicente.

Resolved.
That this House on the occasion of the recent victories by sea, land and air in North Africa, Greece and the Mediterranean, records with gratitude its high appreciation of the services of all ranks of His Majesty's Forces in these brilliant operations, and also of those who by their labours and fortitude at home have furnished the means which made these successes possible.

The Prime Minister: I would ask you, Mr. Deputy-Speaker, whether you will direct that this Resolution shall be recorded in the Journals of the House as having been passed nemine contradicenie.

Mr. Deputy-Speaker: I will so direct.

Orders of the Day — WAYS AND MEANS.

Considered in Committee [Progress, 8th April].

[Colonel CLIFTON BROWN in the Chair.]

AMENDMENT OF LAW.

Question again proposed,
That it is expedient to amend the law relating to National Debt and the Public Revenue, and to make further provision in connection with finance." —[Sir K. Wood.]

Mr. Loftus: The minds of every hon. and right hon. Member must be filled with the grave and moving eloquence of the Prime Minister, speaking under what he called the relentless pressure of events, so that to some hon. Members it may be with a sense almost of triviality that they come back to our routine business. We return to our discussion of the Budget, vast and necessary as it is to us all. It is right that this House of Commons should carry on with its normal procedure in all circumstances.
I would first congratulate my right hon. Friend the Chancellor of the Exchequer on the manner and the matter of his great and long Budget speech. I would join also in congratulating him on issuing the White Paper which is an innovation in our procedure. It is a most important innovation, and I hope that the precedent will not be unproductive. I hope it will be developed into a kind of annual statement of the nation's resources, a kind of national balance sheet, showing year by year the nation's assets and liabilities. The first sensation, when we listened to the Chancellor of the Exchequer and learned what his Budget contained, among those of us who fully realise what we were up against in the war, was a feeling which may be expressed in this way: '' Thank heaven. Here, for the first time, we have a genuine war Budget, a Budget which faces facts and which, in some way, is commensurate with the requirements of the situation." No one who realises the vast output and expenditure of Germany to-day would think that the Budget estimates are too high or that the expenditure estimated for is in any way excessive. Indeed, it would be insufficient, if we had not had supplies coming from the United States under the Lease and Lend Act.
These are not included in our estimates of expenditure and they will swell the estimates enormously. They may make our effort adequate, commensurate and equal with that of Germany.
I have neither sufficient experience nor knowledge of the details of German expenditure—knowledge possessed by a very few Members of this House—to say whether the estimated expenditure is adequate, but no doubt in the course of future discussions some of those hon. Members who have such knowledge will discuss this point. My right hon. Friend said that this Budget showed the firm resolve of the nation to leave nothing undone to secure victory. That, of course, is what causes us to accept the burden without complaint, and I think that after listening to the Prime Minister to-day there is no one in the country who will grumble about any of the burdens imposed, although I would add that it is right that detailed explanations should be given such as were given on the last Sitting day by my hon. Friend the Member for Hastings (Mr. Hely-Hutchinson) to show exactly how heavy the burden is on certain classes.
The first test that I would apply to the Budget is: Does it spread the burden as fairly as possible? Here I feel—and I say it with a great deal of diffidence—that the flat Income Tax increase is not the fairest way of taxation. For that reason I pressed the suggestion of the excess Income Tax on the lines of the Excess Profits Tax. My right hon. Friend has rejected it. For two reasons I am sorry that he has. If the Income Tax is increased at a uniform rate it bears very heavily on the man with the declining income and very lightly on 'the individual whose income is rising. But there is another very vital consideration. One of the objects of my right hon. Friend is to withdraw purchasing power and the pressure of purchasing power on supplies in order to limit inflation. But the danger of inflation "does not come from the expenditure of those with falling incomes, but from the expenditure of those with rising incomes, and that is what we should guard against. That is why I rather regret that the excess Income Tax has not in some way or other been incorporated.
I would like to point out that the proposal of the excess Income Tax was based on the following lines. It is a flexible

proposal. Take the man who earns from£150 to£250 a year. The suggestion was that half the excess should be left to the individual to spend and that half should be compulsory savings. When you get a little higher rate, say, from£200 rising to£300 or£400, one third of the excess would be taken by the State in excess Income Tax, one third would be compulsory saving and one third would be left to the individual to spend. With regard to higher rates, I know a particular case of a professional man whose income increased from£1,000 to£4,000; therefore, the excess tax would be from 50 per cent. to 60 per cent. compulsory saving would be 30 per cent. and he would be left with about 10 or 20 per cent. for expenditure. My- right hon. Friend says that one of the disadvantages of the proposed tax would be that there would be no yield for next year. The suggestions which were put forward were that the standard or basic year should be 1939–40 and that the tax should be assessed on the increased income of 1940–41. Then my right hon. Friend said that there may be two people living together, with the same income, say,£500 a year, that one would pay the tax and the other would not, which would be unfair. Let me take that example. Supposing the man with£500 a year had had£2,000 a year income two years ago, as many professional men had, his commitments such as rent, rates, and personal insurance would be based on the scale of£2,000 a year, and he must go on paying them. The other man with£500 a year had£200 a year two or three years ago. His rent, personal insurance and rates are on the£200 a year scale, and therefore this extra£300 a year is new spending money. [Interruption.] When you insure for life it is done on the basis of your then income, but that is a detail.

Mr. A. Edwards: But a young man may want to take out a life insurance, and by your proposal he would be deprived of the opportunity, provided by his rising income, to increase his insurance.

Mr. Loftus: Of course it would be necessary to allow a young professional man or woman just qualified certain exemptions. My right hon. Friend pointed out the administrative difficulties, but these are greatly lessened by the deduction of tax at source. The second


and third considerations which I gave to the Budget, listening to the speech of the right hon. Gentleman, were: Does it impose as light a burden as possible on the future. Does it reduce the risks of inflation to a minimum? Of course, there must be some inflation. No great power in the whole history of humanity has ever waged a major war without some degree of inflation, and the only evil of inflation is if you let it very considerably reduce the purchasing power of your currency. You can check that by a series of price controls, strict rationing, and so on. But I feel that the Budget as it stands will not be a sufficient check on the danger of inflation and, both for that reason and for other social reasons, as time goes on we shall have to increase the strictness and the range of our rationing and our price control. [An HON. MEMBER: "It should be done now."] I agree that it should be done very soon. The Chancellor pointed out that the last war was financed on the 5 per cent. and even on the 6 per cent. basis, while to-day we are financing it on the 2½or 3 per cent. basis. That is a very remarkable achievement. In the last war the method of financing was very clearly described in 1917 by the late Sir Edward Holden, Chairman of the Midland Bank, in a speech to the shareholders. He pointed out:
Whenever a Government loan has been brought out, the custom has been for the amount of the loan applied for to be taken in instalments from the joint stock and other banks and placed to the credit of the Government with the Bank of England; for the Government to pay their indebtedness out of such credits to their creditors and for such creditors to place the amount received to their credits with the Banks again.
Of course, the technique was for the banks to take up the loans by instalments—5 per cent. loans, and so on—to give the Government credit, the Government drew cheques, the cheques were paid to the Government creditors, and they came back to the bank, thus forming new deposits. To-day we have an admirable technique on which I thoroughly congratulate my right hon. Friend. We borrow from the joint stock banks at 1⅛ per cent. Treasury deposit receipts. There have been people who have said that this money is created by the banks without cost, and Mr. McKenna gave very convincing and able reply to that suggestion, pointing out that against this new creation of deposits

they have to keep ten per cent. in cash or credit with the Bank of England, which returns no interest, and therefore the general interest the bank gets is roughly 1 per cent. which barely covered—if it did cover—the cost of servicing the new deposit money created by this method. That argument is convincing, but there are two factors to which I would draw the attention of the Committee because I think they are of immense importance. Firstly, Mr. McKenna's answer that the banks were creating this money at cost, would be perfect except for the fact that the banks have the option of converting the Treasury deposit receipts at 1⅛ per cent. into permanent long-term loans at 2½ or 3 Per cent. So that, if the cost figure of 1⅛ per cent. is correct, it shows that for an immediate cost of 1⅛per cent. you get a permanent charge on the community of 2½ to 3 per cent. My hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne) pointed out that in fact this means that if the banks say they must have this 2½ per cent. to pay the cost of servicing the deposits, the State— we taxpayers—are subsidising those who deposit money in the banks, to enable them to get their ½per cent. interest and all the free services which the banks render.
I am going to read an article from the "Economist," which contains a criticism which I think every Member of the House should read. This is what it says:
If the banks answer that the cost of servicing the additional deposits thus created makes it imperative to obtain a gross return of 2½ or 3 per cent. on some part of their additional assets, the counter must be that the facilities and service granted to depositors should be paid for by the depositors themselves, and not subsidised by the Exchequer. If it is necessary, let there be a small charge made for clearing cheques, let there be a general increase in the charges made for helping what are now unremunerative accounts, let there be an end of the many gratuitous services which a customer now expects from his bank. If the banks act in concert in this matter, they need have little fear of losing clients and their deposits. And if the new current accounts become really self-supporting, the credit thus created can be given a less expensive counterpart than the new medium-term securities with which the banks are now in process of filling their investment portfolios.
I would ask particular attention to this last sentence:
It would be wholly wrong if the expense of doing banking business were allowed to override the principle that purchasing power newly


created to finance the community and based on the Government's credit should not bear more than the most nominal rate of interest.
I have dealt with that at some length because I believe that the actual amount of Treasury deposit receipts subscribed to by the banks was up to£429,000,000. But there is another thing. The investments in Government securities held by the banks have increased since the outbreak of war from roughly£600,000,000 to, at the latest date for which 1 can get figures, £800,000,000, so that the investments held by the joint stock banks are up by£200,000,000 in medium and long-term loans, plus£429,000,000, or roughly£630,000,000. I suggest that that is really the amount of bank credit money—book-entry money—which has been created since the outbreak of war to finance the war.
That brings me to my right hon. Friend the Parliamentary Secretary. The point was raised by the hon. Member for Stoke (Mr. Ellis Smith) about War Weapons Weeks, and it was pointed out that during War Weapons Weeks, naturally, local people expect the banks to head the subscription lists, and they do. It is a very natural thing for them to do, but let us realise that every subscription a bank makes is the creation of new money. Every economist in the world will agree that a bank, whether the Bank of England or a joint-stock bank, creates money when it purchases investments and securities, and destroys money when it sells investments and securities. That is the whole basis of the control of the Bank of England over the expansion and contraction of credit. The subscriptions by the joint-stock banks to War Weapons Weeks are really an inflationary creation of money.

Mr. Woodburn: Would the hon. Gentleman agree that it might conceivably be possible for the banks to contribute some money out of their own profits, and not by the creation of deposits?

Mr. Loftus: That would be a very small. proportion, and I really think that such a sum as£629,000,000 is out of the question.

Mr. Woodburn: But do not discourage them.

Mr. Loftus: The Parliamentary Secretary said that the banks are entitled to

invest their money where they like, and if they choose to invest it in one town or in another, there is no reason why anyone should take exception. I must deal with that statement, because 85 per cent. of the money in existence at any moment in this country is deposit moneys and at the most 15 per cent. is in other forms of money, currency notes and so on. Of the money passed through the various banking systems well over 95 per cent. consists of cheque money, so that for practical purposes nearly all our money is deposit money. As deposit money must be created from time to time to finance the war—and has been created— it is very necessary that we should know how the vast bulk of our money, whether loaned to the Government, to companies or to individuals, comes into existence. I therefore propose to deal with that for a few moments.
There is a very ancient and untrue superstition that banks lend their customers' money to those who apply for loans. Of course, that is utter nonsense, and no banker or economist in the world would back up such a statement. A bank loan is not a transfer of existing money, it is the creation of new money. How does it happen? When a loan is made to Messrs. Jones, an entry is made in their account of, say, a £10,000 credit and Messrs. Jones can then draw cheques up to that amount—and they do. Those cheques come back to the banking system and form new deposits, which is entirely newly-created money. In the same way, when the banking system lends to the Government on Treasury deposits, the Government borrow, say, £50,000,000 in one week, and draw cheques for that amount. These go to the creditors of the Government, and come back to the banking system, forming£50,000,000 of new money. There are various controls by the Bank of England. The Bank of England controls the basis, and has full power to expand or contract the basis. There are other methods—the purchase or sale of securities creates or destroys money. My hon. Friend the Member for Putney (Mr. M. Samuel) evidently regards my statements as extremely heretical. I would warn him that I can site various standard authorities. There is the founder of the Bank of England, Patterson, who said:
The Bank hath benefit of interest on all moneys it creates out of nothing.


I will quote one of the ablest economists in England, one of the heads of the Treasury, Mr. R. G. Hawtrey. He is one of the most prominent advisers of the Government on these matters. He said:
When a bank lends it creates money out of nothing.

Mr. Marcus Samuel: Then there is no necessity for a bank to have any deposits at all.

Mr. Loftus: Every banker admits that deposits are created by the banks. The hon. Member was not in the House, but if he reads my speech he will see what I said on that point. Mr. J. M. Keynes has said:
There can be no doubt that all deposits are created by the banks.
Mr. Keynes is another prominent adviser to the Government. The Encyclopaedia Britannica, 14th edition, says:
Banks create credit. It is a mistake to suppose that bank credit is created to any important extent by the payment of money into banks. A loan made by a banker is a clear addition to the amount of money in the community.
Governor Eccles, President of the American Federal Reserve, said:
The banks can create and destroy money. Bank credit is money. It is the money we do most of our business with, and not with that currency which we usually think of as money.
Therefore, I would warn my hon. Friend, in view of the testimony of these and other authorities, such as Sir E. Holden and Mr. McKenna, that anyone who can talk to-day about bankers receiving money from their customers and lending it again is as out of date as anyone who talks about the world being flat, in the face of the testimony of every scientist of repute that it is not flat.
I turn to one point in the Budget. I welcome most strongly the compulsory saving provisions. The Press has suggested that they are derived from Mr. Keynes's proposals. I remember this House when Mr. Keynes's proposals were first introduced. The Labour party opposed them, the Liberal Opposition opposed them, and certainly the Government's supporters were far from being enthusiastic. I said, "You may reject these proposals, you cannot reject the facts upon which they are built; and a time will come when you will have to adopt something like them." At last we

have done so. In a characteristic manner we go on and on, refusing to face facts, and then the facts force us to face them. I feel that Mr. Keynes had a 100 per cent. coherent scheme, and that the Chancellor has mangled it. He has cut out an essential part, children's allowances. The whole scheme was interlocked. I quite agree that it is very hard to claim children's allowances to-day for only one child; but certainly, with the pressure of rationing, of taxation, of limitation of supplies, I am sure that we must have children's allowances, at any rate, for the larger families, and that we will have them if the war continues within the next 12 months.
These compulsory savings will pile up in the Post Office Savings Bank in great sums. They will be utilised for the war effort, and after the war we shall all get our money back—at least, we hope so. What is the technique to be? I take it that the Treasury will issue to the Post Office Savings Banks interest-free Government securities. I should be most obliged if we could have some information about that.

Mr. Woodburn: Would the hon. Member not agree, that in the meantime these must be just book-keeping entries?

Mr. Loftus: I quite agree.

Mr. Woodburn: But the hon. Member spoke of the money piling up.

Mr. Loftus: Yes, but I thought I had made it quite clear that 90 per cent. of the money used in any country is book-entry money, created out of nothing.

Mr. Woodburn: The hon. Member did; but he suggests now that the Chancellor is to have a whole lot of documents piling up, because of a few figures in a book.

Mr. Loftus: Surely the hon. Member realises that this credit money will pile up. What is the technique he proposes? The technique I propose is a Treasury issue to the Post Office of interest-free securities.

Mr. Woodburn: But what is the use of introducing a lot of complications into a simple matter? The Treasury are going to use the money for war purposes. That money is to be placed to the credit of the people concerned. Why go to the expense of printing a lot of documents?

Mr. Loftus: There must be some method. We must have some receipt.
The receipt I propose is interest-free Treasury bonds.
I am sorry I have been delayed by various interruptions. I now come to my final point. There has been a lot of talk about the period after the war. Many think it premature to discuss what will happen after the war. I think it right to do so. We have the lessons of the last war before us. I well remember coming back from France in 1919. This country was richer and had a higher prestige than ever before in its history. We had the greatest Navy, the greatest Air Force, and the finest Army in the world. We had the land of England better cultivated than it had been for two generations. We had more skilled mechanics, more skilled shipbuilders, in the country with magnificent new factories and machinery. The whole world was clamouring for our goods, and primary producers throughout the world had good incomes because prices were satisfactory, and they could pay for our goods, and they were demanding our goods. One position was of immense wealth, but financial theory said: "You are poor," and for 20 bitter heart-breaking years we laboured to make the actual facts fit financial theory. Prices of primary producers throughout the world were forced down by our financial policy of deflation, we ruined the farmers of the world and the farmers of our own country. We destroyed shipbuilding yards, pulled down factories, scrapped machinery, forced our skilled mechanics and artisans to migrate to America and the Dominions; we made the soil of England go out of cultivation and become more derelict than it had been for hundreds of years. And at the end of 20 such years of bitter and hard work, we had made the actual facts fit the financial theory, and we were poor indeed and unable to keep up adequate armaments, and our prestige sank almost as low as it had ever been. That is the lesson unless we plan for the future. Whatever the price level is at the end of the war, we must not go back to the deflationary policy; we must keep whatever price level is in existence at the end of the war stable and not go back to deflation.
Let me take another point. The Bank of England to-day is, I think, entirely controlled by the Treasury. Will that control

continue after the war or will that institution, one of the most powerful institutions in the State, break free from Treasury control and become a power almost equal to the State? I pray that it does not. My hon. Friend the Member for Southampton (Dr. Russell Thomas) spoke yesterday of how under the Tonnage Act of 1694 Parliament unwillingly handed over her sovereign powers to 12 men. My hon. Friend made a most moving and eloquent speech, but I must give him a solemn warning when I read these words of his. I myself am in favour of the Bank of England becoming a public utility concern, owned and controlled by the State, with full power to regulate the volume and the price of all kinds of money, and to control the policy of the joint stock banks which would remain in private hands. I would warn my hon. Friend that he is entering upon a very dangerous course. It is quite respectable to declare that the London Passenger Transport or the Port of London should be a public utility service. You can even maintain some kind of reputation if you declare that electricity should be a public utility concern all over the country, but to advocate that the power which regulates the creation and the amount of purchasing power for the whole community which affects every home in the country should be a public utility or corporation is almost to become disreputable.
I have quoted many speakers in this House, and I will end by two quotations simply to ensure that I have a little respectable authority to support me in my views as to the Bank of England becoming a public utility corporation. First, I will quote the noble declaration of Abraham Lincoln, made shortly before he was assassinated—a declaration which may be found in the library of Congress to-day:
Money is the creature of law and the creation of the original issue of money should be maintained as the exclusive monopoly of national government. The monetary needs of increasing numbers of people advancing towards higher standards of living can and should be met by the Government. The circulation of a medium of exchange issued and backed by the Government can be properly regulated and redundancy of issue avoided by withdrawing from circulation such amounts as may be necessary by taxation by redeposit and otherwise. The privilege of creating and issuing money is not only the supreme perogative of the Government, but it is the Government's greatest creative opportunity. Money will


cease to be master and become the servant of humanity. Democracy will rise superior to money power.
I could quote President Wilson saying how
the great monopoly of this country is the monopoly of big credits
and that
the growth of the nation therefore is in the hands of a few men,
but I will end by quoting the present Prime Minister of Canada, Mr. Mackenzie King, and his words were spoken in 1930:
Until the control and issue of money and credit is restored to the Government and recognised as its most conspicuous and sacred responsibility, all talk of the sovereignty of Parliament and of democracy is idle and futile.

Mr. Cary: I intervene briefly in this Debate to thank my right hon. Friend the Chancellor of the Exchequer for the concession which he made and which arose out of a question I put to him in February last in respect of the loss incurred in providing additional buildings, plant and machinery for the war effort. I do not think that it is generally appreciated how great has been the strain upon equipment in factories in recent months, and if the scale of production is to continue at its present pressure the charges for replacement will bear so heavily upon many companies that the action of my right hon. Friend in making these small allowances will come to them as something of great benefit. I should also like to applaud his decision in not giving way in any substantial degree to the change which was asked for in the Excess Profits Tax at 100 per cent. I was a little concerned in the weeks leading up to the Budget at the type of propaganda which was being sent to Members of this House advocating on behalf of industry that there should be a change in this tax, in some respects a substantial change, round about 70 or 65 per cent. I received one brochure, like most hon. Members, and there were two sub-headings to which I strongly objected— "Experience versus street corner oratory" and "A political attack upon industry." I took the trouble to look up the speech which was given by the late Mr. Neville Chamberlain on 26th April, 1939, when introducing the Military Training Bill, when he made it clear on behalf of the Government that, if war should occur, the country would never

be allowed to return to the sordid level of profit which we had known in wars before. But in any case, if my right hon. Friend the Chancellor of the Exchequer had been favourable to the suggestions that were made to him—and I think in some cases on purely a business and technical basis they are almost unanswerable—how could he make any substantial concession when he had to bear in mind that in relation to the rest of the community they faced a position in which the general level of wages had risen by only 13 to 15 per cent., whereas the cost of living had risen by no less than 26 to 30 per cent.? Even if a change were desirable, I congratulate my right hon. Friend in keeping intact the pledge originally given by Mr. Neville Chamberlain.
May I say a few words about post-war credits, as they will apply to firms and individuals? My right hon. and gallant Friend the Financial Secretary to the Treasury said yesterday that he was a little surprised that no comment had been made on this aspect of the Budget. He thought it would be the subject which would have been discussed most. Perhaps the Committee has not yet recovered from its surprise; perhaps this picture of a benevolent Chancellor of the Exchequer giving back money to firms and individuals in the post-war years is too remote a picture. Perhaps there is a feeling that what could be said about it now would be out of order and would not make any substantial contribution to this Debate. But I feel—and I hope many hon. Members will also feel—that this act on the part of the Chancellor of the Exchequer will in the end prove to be one of the most stabilising factors in the post-war years, both for firms and individuals. The firms which are left in business have a tremendous responsibility to help back into productive industry those firms which are shut down through the concentration of industries. Individuals, too, have an immense moral obligation resting upon them to recreate in our national life that family tradition which has been the main feature of our national character.
In the immediate post-war years we want confidence and stability, and the mere fact that my right hon. Friend will give most firms and so many individuals a financial stake in the stability of those years is something which I think will, in time, come to be welcomed by the whole


country. Our financial strength, dependent upon ourselves, is also dependent upon that great panorama of trade which we can inspire throughout the country and the world. The Budget in its interest is not limited to ourselves; it is a Budget which is of great interest to all Empire Governments. The Chancellor must begin to think seriously of the great trade problems which are the direct concern of some of his colleagues in the Cabinet. I should like to see, even at this juncture in the war, an Empire economic policy and a requirements committee, not necessarily exclusively centred in London, working almost day and night upon those problems. Lord Stamp has had many occasions in recent months to ask for a greater degree of unity in what he calls the sterling area. He says that sacrifices have been made in some quarters, but that not enough sacrifices have been made in other quarters.
The sinkings and shortage of shipping are not only having a grave effect in this country—and from what the Prime Minister said to-day we hope the cause of that effect will be removed in the months to come—they have been having a grave effect in some of the other Empire countries. New Zealand, unable to get away her great produce of meat and butter, may come to a serious domestic crisis. I only hope that future proposals will pay due regard to the trading strength of our country. My right hon. Friend the Chancellor in his statement yesterday referred to our possible trading relationships with the United States. We are exceedingly grateful to that country for the help they propose to give us under the Lease and Lend Act, but my right hon. Friend the President of the Board of Trade is also seeking facilities to increase United Kingdom exports to the United States. He is also contemplating setting up a Marketing Board in the United States for that purpose. In 1938 non-agricultural imports by the United States from Continental Europe represented over 400,000,000 dollars. I wonder how much of that former trade with Continental Europe the United States will find it possible to give to us if, on the basis of our scheme of selective exports under the concentration of industries, we are able to supply that market. These things are so profound in the strength of our financial position that they

can never be divorced from anything which may be in the Chancellor's mind in framing new monetary proposals for the nation.
When the war ends we shall not find peace; we have to build peace, and perhaps those years that follow this war will be far grimmer and harder than the war years themselves. Some weeks ago my right hon. Friend the Member for Keighley (Mr. Lees-Smith), in one of the best broadcasts I have ever heard throughout the progress of this war, said that the war's outcome would be decided by our staying power and the quality of our long-term planning. It is to long-term planning that the thoughts of the Chancellor of the Exchequer ought to be directed. Victory will give us immense optimism, but do not let us under-rate the realities which will face us with the coming of victory. There will be an Empire hopelessly over-industrialised, with the special machinery of trade agreements out of date or nonexistent. There will be too little capital or, as a result of inflation, too much, and vast numbers of our people, sick of the blood, tears and sweat of the war, will be longing for the comfort of the homes which they once knew. I dread to think of the fate of any administration which had only a dusty answer to give to that situation. I congratulate my right hon. Friend the Chancellor upon his Budget, and I think his great work in recent months has made a sound and a substantial contribution to ensure that the post-war Government of our country will have the reverse of a dusty answer to the realities which will face them.

Lieut.-Commander Gurney Braithwaite: I did not have the good fortune to hear the Chancellor make his Budget Statement, but I read the report as soon as I could, and if the speech sounded as well as it read hon. Members must have had two hours of lucid exposition of a very complicated Budget. The Chancellor paid what have become the usual annual tributes to the taxpayers, direct and indirect, for the cheerful and determined manner in which they have shouldered the tremendous burden, but that does not absolve the Committee from its historic duty and responsibility of scrutinising expenditure. The fact is—no matter how it be camouflaged —that all is very far from being well on the financial front. We have listened to a


statement by the Prime Minister of considerable gravity on the military situation. We must always remember that the sordid and dull question of finance remains an essential part of the national defence if we are to survive.
The expenditure of£13,500,000 a day which we have now reached is taken as evidence that we are getting into our stride, and we point to it with a good deal of pride as being an earnest of our determination to see the war to a successful conclusion. But far more is this expenditure an evidence, I fear, of a failure to evolve, during all these months, a wages policy. The other day the Minister of Labour made a brief appearance on the music-hall stage during the B.B.G,'s Saturday evening music-hall programme. He deprived me of some three or four minutes of Arthur Prince, which frankly I should have found more enjoyable under the circumstances. I think that the feature "From the Front Bench" is the occasion for Ministers to appear. In making the appearance to which I have referred, the Minister of Labour told the people, quite truly, that although Hitler could smash their homes, he would never break their hearts, and he went on to reiterate a statement which the Prime Minister made on the wireless one Sunday evening that the time was coming when we would drop four bombs on Germany for every one which they dropped on this country. That statement was naturally greeted with the applause which it elicits in various parts of the country where people are under no delusion about our having no quarrel with the German people. But the Minister of Labour might have gone on to say that the same ratio of four to one, spread roughly over the country, represents the ratio of the remuneration of the rank and file in the reserved occupations compared with the rank and file in the Fighting Services, to whom the House has just paid a well-deserved tribute.
The gap between revenue and expenditure is not so remarkable, and will not be regarded as so remarkable in the years that follow, as the yawning gap which we have allowed to open between the rates of remuneration of men conscripted from their normal employment and those remaining in the reserved occupations. There is an extraordinary gap between the remuneration of the man who makes the

gun and the man who fires it. The leading signalman responsible for the whole communications of a vast convoy of some 50 ships in the Battle of the Atlantic, the young man who is responsible for the signals of his commodore being passed without mistake, and whose mistakes might have fearful consequences, receives as his remuneration something like one-fourth of what can be obtained by a fire-watcher or a roof-spotter. It is that sort of thing which will astonish posterity.
Frankly, I do not think the Chancellor was at all convincing when he set forth the objections to applying to inflated wages the principle of the Excess Profits Tax. Do not let us be hypocritical about having taken the profit out of war. The profit may have been taken out of the employers war, but certainly the profit is coming in as far as the employés war is concerned. I do not blame the employés for that. Agreements have been made after the proper machinery has functioned. I should have thought, however, that a very reasonable yardstick for a computation would have been the negotiated trade union rates ruling before the declaration of war and the levels which have now been reached as a result of negotiations. Cost-of-living subsidies have been imposed to keep food prices down. The cost-of-living index is not all that it might be as a criterion.
When my right hon. Friend speaks about the important part played by savings, I am a little disquieted. I hope that the example I am about to give is an isolated one, but I have taken the opportunity of finding out in three factories engaged in war production what proportion of those who have received increased wages during the last 18 months belong to savings groups. I find that a little over 10 per cent. belong to them. It may well be that some of these people save without joining in the groups, but it is disquieting at any rate to find that ratio running through three factories, which I selected because I happened to know those who control them. However good may be the intentions of my right hon. Friend concerning price fixing— which is of enormous importance and a policy which hon. Members endorse and support—it will be of little avail until the problem of wage-fixing has been tackled.
But the figure of£13,500,000 a day is dangerous not only from an inflationary point of view; it is dangerous from a psychological point of view. When a figure of that sort is reached, it becomes extraordinarily difficult to resist suggestions for expenditure. Wherever one goes, in the Forces, the factories or the executives, one finds an attitude of, "What do a few extra pounds matter when there is an expenditure of £13,500,000 a day?" In for a penny, in for a pound. It is amazing how a man's mentality changes the moment he ceases to work for himself and begins to work for the Government. A man, whether in uniform or not, who, proceeding on duty, carrying a light suitcase, arrives at Paddington to proceed to Liverpool Street, jumps into the nearest taxi, knowing full well that his expense sheet is in his pocket, and will be filled in when he gets to his destination. But, put that gentleman in his bowler hat and in his civilian clothes, and let him carry that same light suitcase, when he is engaged in his ordinary peace-time occupation, and, of course, he will proceed by the more democratic and very often more rapid method of the humble tube, which hon. Members use after the Sittings of the House. Once that man is put on Government work, he becomes taxi-minded. I suggest that we are living—and the Committee should take notice of this because we are all determined to win this war— in an era of departmental megalomania which is affecting the whole national economy.
I am glad to see the hon. Lady the Member for Frome (Mrs. Tate) entering the Chamber, because she has spoken so frequently on agricultural matters. I hope to enlist her support in what I have to say in my next few sentences. The question of the production and the consumption of food cannot be divorced in chese times from the national economy and a planned budget. I should like to know how many young men have been taken from the plough, and, what is far more serious, from the mechanical tractor, during the last few months in order to polish the boots and buttons of other young men. There is a waste of money and man-power going on as a result of this departmental megalomania. In times of total war this sort of thing is quite an unnecessary luxury for officers, young or

old—their womenfolk cannot get such assistance of a domestic character. It is an example of the large mindedness from which we suffer when we get huge Budgets. I hope the Financial Secretary will not regard my speech as entirely destructive, because we are all anxious to come through this job successfully; but it is important to see whether the gap cannot be closed by economy as well as by increased taxation. This£250,000,000 which is being raised as a result of increased taxation could probably be saved if Departments, His Majesty's Forces, and everyone else were run on the same lines as these same gentlemen would conduct their own affairs in times of peace.
If the Chancellor had dealt with the wage problem when it first arose, together with the problem of prices, we should have secured economy in respect of the expenditure we are to-day asked to find. As it is, the taxpayer is offered, what I am bound to regard with some suspicion—I think it is largely fictitious—what is called a nest egg. I read about this In yesterday's Debate, and I noticed that the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) was beginning to take an interest in that nest egg. The scheme will form the foundations of a capital levy. It will be subject to taxation, and in any case the Treasury will probably say to the taxpayer, "You now have the shell left which we shall set off against your Income Tax liability in the coming year." Anyone who thinks he is going to collect hard cash for this nest egg after the war is over is, I believe, living in a fool's paradise. It reads nicely in the Press, and has been claimed in many quarters as easing the blow, but I think we should be clear that this is likely to be a book-keeping entry rather than a sum to draw when the war is over. The taxpayer will turn a blind eye to these imperfections providing he receives value for his money. The morale of the taxpayer is as important as the morale of the fighting man, particularly when they happen to be the same person. It is important the taxpayer should feel that as a result of the sacrifices he is really going to get his money's worth and the results which he seeks.
The bombing of Brest, Lorient and the invasion ports represents sound strategy, but what a difference there is on the faces of the people in the street when there is a


placard reporting the bombing of Berlin. Let it be realised, if you want to give them result and value for their money, that the time has come to blast the enemy and destroy his homes as he has destroyed ours. I well remember that fateful Sunday morning in this House when the late Mr. Neville Chamberlain, the then Prime Minister of the day, stated amid universal acclamation that we had no quarrel with the German people. That is not true now. After 18 months of the bombing of civilians, the machine-gunning of refugees on the roads, the attacks on merchant seamen and passengers in open boats, the sinking of the "City of Benares," and the bombing of our ancient buildings, all gloated over by the German people, the time for that kind of talk has gone. The hon. and gallant Gentleman the Member for Epsom (Sir A. Southby) evolved a slogan last autumn—"Sock the Wop." We have done that, and the time has come to substitute for it, "Blast the Hun." Let the German people drink the cup of defeat to its dregs with their homes crashing about their ears, and, if that is done, the taxpayer, if he is confronted with even greater demands, will then say that it is cheap at the price. That is all the more reason for this Committee to see that the sacrifices of the taxpayer are not wasted in unnecessary extravagance.

Mr. Gledhill: Like most other hon. Members, I desire at the beginning of my speech to congratulate the Chancellor of the Exchequer on his statement. He performed a very difficult task with his usual charm of manner, and, although we all feel that we are being bled white, we almost like it. I think there are general signs outside of the determination of the public to accept any sacrifice, and to put up with any sort of restrictions, many of which are unnecessary, in order to resist the aggression of Hitler and his gang. But in doing that, we are entitled to ask something in return. We are entitled to ask the Government to observe the greatest possible economy and to see that waste of all kind is prevented. The Chancellor of the Exchequer commented on this fact when he said that part of his Job was to secure full value for the enormous sums of money coming into the Treasury. I may be told that there is a Select Committee which is investigating Government expenditure. I do not wish to detract from the value of its work,

but it seems to me that that is rather locking the stable door when the horse has bolted; Although we have had a number of reports, we have not been told what action has been taken as a result. A few months ago I put a Question down to the Prime Minister, which I think was ultimately answered by the Chancellor of the Exchequer, asking whether a small committee, consisting largely of business men and accountants, could not be formed to examine the organisation, the staffing and routine of Government Departments. I received the usual putting-off answer which one gets from Government Departments when one makes a suggestion of that kind. I should like, however, to renew that suggestion now, and to ask whether it would not be possible to introduce a small committee, of about half-a-dozen at the outside, to examine thoroughly the organisation of the various Government Departments, and especially the new Departments which have been created as a result of the war effort. It should be possible for them to make many suggestions for alterations in routine, methods of filing records and seeing that they are absolutely up to date and on modern lines. It might be possible for them to suggest amalgamations. I have felt for some time that the Ministries of Transport and Shipping ought to be brought together, both being concerned with the same big subject of transport, and it would seem that there is something of this in mind.
While welcoming the small advantage that has been given to us in respect of Excess Profits Tax, it seems strange that the Chancellor of the Exchequer has not taken any powers to extend the principle to the largely increased earnings of certain individuals. Directors of companies are not allowed to increase their salaries, or, if they do, the increase is taken into account in the Excess Profits Tax calculation. There are many firms whose products are marketed by agents and representatives paid on a percentage of the turnover. They are getting largely increased incomes, due in the main to the increase of price and the very much bigger demand made by the war. They are getting those increased incomes, not by any greater effort on their part, in many cases by a very much less effort, but directly out of the war itself, and it seems a pity that some method cannot be


devised of extending the principle of the Excess Profits Tax to those cases.
When the Purchase Tax was first instituted we were told that the revenue would be in the neighbourhood of£100,000,000 to£120,000,000. It seems at present that it will fall a long way short. We are told that up to date£26,000,000 has come in and that in the next 12 months the Chancellor expects£70,000,000. I am afraid he will be disappointed, because, with the tremendous increase of taxation and the reduction of allowances, spending power will be reduced and the tax will not yield the revenue. Would it not be wise to reconsider it? There is a number of anomalies. I have details of anomalies in the stationery trade. A wage packet, if blank, is taxed. If it is printed, it is not. A filing card, if ordinary plain-ruled, is taxed. If it has cash lines ruled, it is not taxed. There are many similar anomalies which require to be dealt with. I suggest that, as the revenue is very much less than was expected, the tax might be reconsidered, or even scrapped.
I should like to make an appeal on behalf of fathers of families. The allowances have been very much reduced, and some two or three years ago the educational endowment system was washed out. It seems to me that the man who has two, three, four or more children to bring up and educate in these difficult times should receive some further consideration. With Income Tax at 10s., in spite of which we are still aske3 to go on saving, it is very difficult indeed for the father of a household to carry on and educate his children as he would like to do. I appeal to the right hon. Gentleman to consider whether it is not possible to grant some small concession to fathers of families from the point of view of education.

Mr. Craik Henderson: I should like to join with others in expressing my congratulations to the Chancellor of the Exchequer. I think his speech, particularly the first part of it, was masterly. I have read a great many Budget speeches of the past, and there are very few to equal his for a comprehensive grasp of the subject. If I appear to be offering one or two criticisms, I hope he will realise that I am one of his greatest admirers, and I criticise more in

sorrow than in anger and under the belief that, if he has fallen away from what I think is the path of true finance, it is due to the bad advice that he has got particularly from the Committee itself. I remember on the April Budget being rather shocked to hear it said constantly that the true test of our war effort was the amount that we spent. I heard it again in July, and we heard it again from the right hon. Gentleman the Member for Keighley (Mr. Lees-Smith) on Monday, when he said that the higher the actual figures for expenditure, the more the nation would welcome it. For the Committee to give advice of that kind to the Chancellor, who, after all, is the watchdog of the community, is dangerous. The true test, of course, is whether the money is being spent to the best advantage.
I should have been glad if the Chancellor had been able to explain the extraordinary difference in the expenditure in the second year of this war and in the second year of the last war. In this war our expenditure was£3,900,000,000 and in the second year of the last war, when we were carrying on a great campaign in France, our expenditure was only£1,500,000,000. Even in 1918 it was under £2,700,000,000. I can see certain causes for an increase, but not to this extent. I do not think hon. Members realise the feeling outside the House with regard to waste. The country is being taxed up to the hilt, and the feeling of anger is growing. I appeal to the Chancellor to adopt efficient methods of checking it. I know that the Select Committee is doing very good work, but I think some further step is required. It has to be realised that a pound saved is very much more valuable to the war effort at this time than a pound raised by taxation or by borrowing. 
There is a second point on which I think the Chancellor received bad advice. In July he was encouraged from all sides to tax more severely, and he was criticised in his last Budget because he had not put on enough taxation. I think I was his one friend, and I praised him for not having taxed more severely. I think he has been proved to be right. There is a surplus of£48,000,000 on the last Budget, due to the fact that he showed discrimination in not imposing excessive taxation. This time there has been unanimous praise for the taxation


that he has imposed. I think the advice given to him was wrong. Our expenditure last year was nearly£3,900,000,000, and our revenue was£1,500,000,000. In other words, we are recovering our expenditure by taxation to the extent of 38 per cent., which is a very high figure. Many Members seem to think that it should have been higher, but the taxation already in some of its aspects is to my mind penal and not fiscal.
I would like to refer to the methods by which the new taxation is to be raised. I would refer first to the Income Tax on the lower levels of incomes and the withdrawal of the allowances. In some cases that undoubtedly will fall very hard, but there are some cases where it was absolutely essential. Take the case of a man with two children and a pre-war wage of£3 whose wage to-day is£8. If we assume no change in his standard of living he will have an expenditure to meet of under£4 and is left with a surplus of£4. The Chancellor has imposed further taxation on him which will amount to 15s. a week. The man is, therefore, left with a surplus of £3 5s No one would say that that man should not be taxed. On the other hand, a man with two children, whose income before the war was£8 a week and who now finds himself with this additional taxation, is placed under a severe burden because he has the increased cost of living and the new taxation to meet. I know the difficulties but I wish that the Chancellor had been able to differentiate between these two cases.
The Chancellor has said—and this is a serious point which I raise with some hesitation—that he is adding 2,000,000 workers to those paying Income Tax. Is he satisfied about that? He no doubt knows what has been stated by Mr. Frank Hodges and what a good many of us know from our personal experience, that a considerable number of men in certain industries, rather than pay Income Tax, absent themselves from work on so many days a week. I would ask the Chancellor whether he has consulted with the Minister of Labour and found some remedy for this serious state of affairs which one is afraid may increase as the result of the Budget. The danger is that the Chancellor will not only not get his Income Tax from that source, but that the country will lose the labour of these men. I am not suggesting what the remedy

should be, but it is a point which requires careful consideration and some remedy should be found.
I would like to say a word on behalf of a class for whom nobody ever says a word, and that is the Surtax payer. The amount of the tax on the higher incomes cannot, in my view, be justified on any sound method of taxation. If the Chancellor felt he had to increase Income Tax to 10s. in the£ he should have reduced the Surtax scale so as to make it possible by rigid economies for the taxpayer to pay the tax out of income. The Chancellor is not entitled to effect a capital levy under the guise of a tax on income. I think that it is not realised sometimes that a man with an income of —150,000 a year in last year is required to pay—143,000 in Income Tax and Surtax and that the Surtax is payable not in January this year or January next year, but in January 1943. Would any man willingly undertake this enormous responsibility, on what must be a falling income owing to the 100 per cent. Excess Profits Tax, for a commission of 11½d. in the£for collection and for taking the risks involved in failure to pay? I am sure that he would not. I think that the Chancellor will require to make some concession to the higher ranges of Surtax payers. If we are to have a capital levy, let it be done in a deliberate way and not indirectly.
I have said that the second mistake the Chancellor made was in trying to raise too much by taxation. It is interesting to look at what happened in the last war. In this war we have raised 38 per cent. of our expenditure by taxation. In the last war we raised a much smaller proportion on a much smaller expenditure. In the second year of the last war the amount raised in taxation was£336,000,000, against£1,500,000,000 in this war. Even in the last year of the last war taxation was only£707,000,000—and let us remember all that was happening in 1918. Over the whole years of the last war only a little over 25 per cent. of our expenditure was met by taxation. There was some reference in the thoughtful speech of the right hon. Gentleman the Member for East Edinburgh (Mr. Pethick-Lawrence) to Mr. Bonar Law. I would like to quote what Mr. Bonar Law said in his Budget speech of 22nd April, 1918, but there is


not time for that, and I will quote only one sentence:
It is absolutely essential that we should not levy taxation on such a scale as to cripple every industry and every financial institution in this country." —[OFFICIAL REPORT, 22nd April, 1918; col. 705, Vol. 105.]
That is a risk which we have to guard against, for it is a serious risk. It is not true to say that increased taxation will always give increased results. We all know that that is not the case. He could have filled the gap of£150,000,000 if he had raised Income Tax to 9s. and withdrawn the earned relief only and left the other reliefs. That would have brought him in say£60,000.000. He could have got the other£90,000,000 by economies and by the increased return he would have got from the confidence of the country. Last year he had a surplus of £48,000,000, and I am sure that he could have anticipated much greater lending if the country had had a 9s. Income Tax. It is not sound finance in the second year of the war to tax up to the absolute limit. It would have been better in this second year of war not to have imposed such crippling taxation. Excessive taxation, by leading to lack of confidence and by causing forced selling and other kindred evils, defeats its very object. In my view the full is. 6d. increase in Income Tax was unnecessary, and certainly premature.

Mr. Craven-Ellis: I Want to take what will perhaps be considered by the Front Bench to be a somewhat unusual course, and that is to congratulate the Chancellor of the Exchequer. I do so, not because I think there are not many things in the Budget which might be criticised, but because this is the first Budget that I have had the privilege of hearing during the 10 years I have been in this House that shows any attempt to be realistic. It introduces novelties, if I may so term them, which I am satisfied will be extremely helpful not only to a war-time Budget but to a peace-time Budget. One note which the Chancellor of the Exchequer struck is, I think, extremely significant. It is one from which those who think like myself can draw a flicker of hope for the future. He has shown that he is now determined that any fresh loans that he launches shall be on no better terms than those which have

already been floated. He proceeded to indicate that the post-war period must be one of cheap money.
I have been a very strong advocate of cheap money ever since I came to this House, and sometimes somewhat troublesome to the present Chancellor and previous Chancellors, but I feel that I have adopted the right point of view. Let us refer to the position which we found in 1931. The then Chancellor of the Exchequer, the late Mr. Neville Chamberlain, did have some vision in dealing with the situation at that time, and after 1932 he did in a very determined way insist upon a cheap money policy; and, believe me, that was the very foundation of the restoration of industry following the crisis of 1931. The Chancellor has now shown the same vision by suggesting that the post-war period will be a cheap money period, because he knows after our experiences following the last crisis that cheap money is absolutely essential to restore industry.
One cannot review this Budget speech and realise what it means when we are out to spend£3,884,000,000—not taking into account the moneys which we shall spend in America and within the British Empire. The way in which the Chancellor has drawn a line between those two fields of expenditure is clever and shows considerable foresight, but£3,884,000,000 is a colossal sum. The hon. Member for North-East Leeds (Mr. Craik Henderson) tried to give us some indication of the difference between this war and the last war in terms of money, and compared the £1,500,000,000 then with the£3,884,000,000 at the present time, but that does not mean that we are getting a corresponding increase in the volume of goods for our expenditure, because there has been a considerable change in the value of money. I mention that because otherwise the comparison might create some little confusion. I get back to the£3,884,000,000. That expenditure is to be liquidated partly by taxation of£1,800,000,000; then we are to have borrowing and then we come to the gap. We are to induce the people who have money to lend it to the Government.
I say without any hesitation that the amount of£1,800,000,000 which is to come from taxation is the definite limit of what we can take in taxation out of


the national income as it is at present. The White Paper puts the national income at £5,894,000,000, and I do not disagree with that figure, but I think it is rather an underestimate. However, that does not matter; it makes no difference to my point of view that we have reached the limit of the burden of taxation upon the people of this country.
The Chancellor of the Exchequer made a particular reference to the fact that he wanted to be very fair in spreading the burden of taxation. I do not want to suggest that he has any other view, but his method of spreading taxation is not working out as fairly as he apparently thinks it is. When the heavier income-earners are not allowed to have an income in excess of£3,000 it does not seem to me that the taxation has been very equally spread. Earnings of£150,000 a year will leave a man with only£3,000, or approximately£3,000. Let us not forget that such men have in peace-time built up obligations which go on for a very long time, and how are they going to deal with those obligations? They cannot throw them overboard immediately there is a Budget such as this. I think we have gone a little too far with the higher income-earners, and I feel that the Chancellor has lost an opportunity by not going more deeply into a proposal, which I for one was responsible for bringing to his notice, for an excess Income Tax. I am certain that there is a field there which would have brought in quite a considerable sum, and he would at the same time have been doing exactly what he says that he is trying to do, and that is make the burden of taxation more equitable.
Another feature of the Budget is the Excess Profits Tax, again a matter to which I referred on the last Budget. The Chancellor has now satisfied himself of the truth of what many hon. Members said on the last Budget, that it was working unfairly. Various proposals were submitted to him. The one which he has accepted is one which my Committee, the Parliamentary Money Committee, put forward some months ago, but still he has not yet: removed the whole of the inequities of E.P.T. Consideration is still justifiably demanded for the question of the standard year. The standard profit arrived at by some companies makes the result most

discouraging, unfair and unjust. Having regard to the fact that we are dealing with such colossal figures—I believe I am right in saying with record figures—what difference would it make to deal out a little justice to the firms which are in a peculiar position? They may be new companies which have had to incur a great deal of development expenditure and were just coming into profit when the war started. These cases would not be very numerous. No matter how few or how many they may be, why should they continue to be treated in a way which I believe the Chancellor of the Exchequer is satisfied to be unjust? I would ask my right hon. Friend to review that position.
Another picture of the Budget being considered with satisfaction is the subsidising of certain commodities. I look upon this feature as one of the most important developments in the Budget. By adopting that method, the Chancellor of the Exchequer is looking after the abnormal expenditure or cost of certain foods or other articles of general consumption, and it gives him considerable power, if he will only use it, as a lever to maintain stability in the currency. That is extremely important. If there is one thing which causes dissatisfaction or breeds lack of confidence, it is the possibility of the currency not being maintained upon a stabilised basis. For that reason, I congratulate my right hon. Friend on having the foresight to introduce this feature as part of Budgetary policy. He can go a long way with it when the post-war period comes.
Although the Chancellor of the Exchequer divided his Budget into domestic and overseas, sooner or later, whatever the cost of war equipment may be which comes from overseas, it has to be settled for. The Chancellor gave no indication of how he was going to deal with it. He may deal with that material in a way which never need to be brought into the Budget, or make any difference, so far as domestic expenditure is concerned. Who is making it possible for us to enjoy this advantage? It is the United States of America, and we should thank God for President Roosevelt and his people. Although they have not declared war, they are virtually in the war, and the contribution which they are giving is most vital. We should be thankful for what America is doing.
May I conclude by a reference to the gap, which is so often referred to as inflation? I will endeavour to minimise the fear of inflation as much as possible and draw attention to the fact that before the war we adopted a policy which was based on the monetary report and upon the British currency declaration of 1932–33. Prices rose, but it was the deliberate policy of the Government that they should rise. As they were rising, we introduced the word "reflation," with the assistance of America, because they were going through a similar period of depression with ourselves. Subject to a stabilised currency being maintained, there is no fear at all or our getting into a state of inflation, unless we overstep the mark by putting on the market a greater volume of consumable goods than should be there, having regard to the volume of purchasing power, and also by reaching a stage where there are no able-bodied people to be employed. Those are the two main reasons and causes which may bring about inflation.
We must bear in mind that the war has introduced new standards. We used to speak of something like 14,000,000 insured persons a year, but we now think in terms of nearer 70,000,000 workers. There is that large body of employable labour, but until it becomes fully employed the risks of inflation do not become too great a problem. By the methods that he has adopted, the Chancellor of the Exchequer can keep inflation under reasonable control. The only danger that I see of inflation, infinitesimal at the moment, is if the Chancellor should, by any chance, loosen the reins which he now has over consumable goods, raw materials, labour and so on. He would then run a great risk of inflation. I started my speech by congratulating my right hon. Friend upon showing a more realistic outlook upon finance than has been recognised for some time. I think we may rely that he will keep the matter under proper control.
We are all ready to do what we can to help the right hon. Gentleman and his colleagues to win the war. It is the only thing that we have at heart. I do not care how great the sacrifice, so long as the right hon. Gentleman gives us all a square deal. We are able to submit to any hardship such as taxation. If we

and the other free peoples are not able to overthrow the aggressor who would rule this country as well as other parts of the world, because of his ambition to become a world power, we shall have to-suffer such privation and loss of liberty and freedom that we are prepared to do anything rather than face that prospect. The workers of the country have really buckled to and played their part in the great struggle in which this country now finds itself. I do not suggest that there are not a few black sheep, but I think that the Minister of Labour has powers which he will be able to exercise in order to see that even the black sheep are properly employed. Nothing should be allowed to stand in our way to final victory, but between now and that result, we shall find some very hard tasks in front of us. But even those hard tasks do not discourage us. Our backs are stiffened and we shall see this war through to the end, whatever be the price that we shall have to pay.

Mr. Lipson: If my right hon. Friend the Chancellor of the Exchequer were not the most modest of men, his head might very well have been turned by the many praises and congratulations which he has received, deservedly in my opinion, on his Budget and his Budget speech. Probably no congratulations gave him more surprised satisfaction than those which he has just received from the senior Member for Southampton (Mr. Craven-Ellis). However, he has been sufficiently long in political life to know how fickle is public opinion, and he probably does not need to be reminded of the well-known saying, "Beware when all men speak well of you." Perhaps he will allow me, as one who has admired his work in other great offices of State, to say that I rejoice that he has come into his own in his present high office.
The Chancellor has told us that he is waging an incessant battle against inflation. He has reminded us of what inflation would mean in suffering to the poor and in havoc to our war effort. Inflation destroys confidence, and woe betide any country when its citizens have lost that quality. Therefore, I am sure that, in his fight to prevent inflation, the Chancellor can rely upon the good will and support of the people, and that all will wish him God speed in his task. If he succeeds, and I believe he will, the Chan-


cellor will have deserved well of his countrymen. This Budget calls for a very great increase in expenditure, and up to the present, nobody has criticised that expenditure as being excessive, because it is generally recognised that it is the only effective means we have of judging an increase in our war effort. We believe that this increased expenditure means an increased war effort, and, to that extent, that it brings us nearer to victory. For that reason, it is to be welcomed, but the question may well be asked, Is that increased expenditure enough? The test of the expenditure on our war effort must be the amount of expenditure that is being incurred by Germany. I am told that the latest figures, as far as Germany is concerned, show that her present war expenditure to be in the region of£7,000,000,0.00 a year. Our own expenditure, even if we include with it the expenditure of the Dominions and what we are hoping to get from the United States of America, still falls considerably short of what Germany is said to be spending. Therefore, I repeat the question must be asked—and only those in possession of all the facts can give an adequate answer—Is our war expenditure enough?
The right hon. Gentleman the Chancellor of the Exchequer has, very properly, told us that he will see that, so far as lies in' his power, we shall get value for money. I would like here to emphasise the point which has already been made by other hon. Members, but which I think cannot be said too often, that it is absolutely necessary to see that none of this money is wasted. Public opinion has been stirred by the glaring examples of waste which have been disclosed in the several reports of the Committee on National Expenditure, but I would remind the Committee that those are only sample cases which have been brought to the attention of the Committee, and that there is a widespread feeling throughout the country that there is a considerable waste of public money going on and that it is the duty of the Treasury in this matter to show itself a good watchdog. The Treasury, of course, has the right to expect the support and co-operation of the spending Departments, but if there is one thing that will make the taxpayer disgruntled over his burden it will be the feeling that the money which he has to find at very considerable sacrifice is being

frittered and wasted away. Therefore, this question of economy and of value for money is of vital importance. I hope that not only shall we have no waste of public money, but that we shall not even have the appearance of waste.
The Chancellor has indicated the object of his taxation and his economic policy generally. He is concerned to see proper control over the surplus spending power after the population has met all necessary expenses. That is to say, the Chancellor is concerned not only with what a man earns, but with the way in which the money is spent, and it is his business to see that there is no unnecessary expenditure. To that end, of course, Government policy is also contributing in other ways, and, in particular, rationing and the limitation of supplies tend to secure this same object. But I would ask the Chancellor of the Exchequer whether he will not give further consideration to the suggestions which have already been made, that if he is to secure the proper control of a surplus spending power there must be a widening in the range covered by rationing. I believe that there is a widespread feeling, based on justifiable facts, that such rationing is overdue and, therefore, I would ask the right hon. Gentleman to give further consideration to-this matter. He has already made it perfectly clear that all his calculations will be upset unless we have a wages policy. He has expressed the hope that it will be possible to stabilise wages round about their present rates. I would ask him to consider this question: Does he feel that a pious hope of this kind is enough to-bring about what he desires?
Will he not consider whether something more is not necessary and whether the' time has not come for the Government to face the question of the regulation of wages? He has indicated the grounds on which he bases his hope of stabilising wages at about the present rates, namely, by fixing the cost of living more or less at the present level by subsidies. I think he is right in trying to keep the cost of living where it is, and in the method he is adopting, though of course very careful control is required to see that the subsidies not only achieve their end but are not taken advantage of by those who would try to derive undue profits out of the rise of prices.

Mr. J. J. Davidson: Is the hon. Gentleman asking for a measure of Government control over subsidies?

Mr. Lipson: Of course I am. It is public money that is being spent, and there must be some kind of public control to see that the expenditure is justified, and that the money is being used for the purpose for which It is intended. I feel that money spent on subsidies to control prices is money very wisely spent. It will bring in a very good return to the Treasury, to the extent that it is successful in keeping prices down. The amount of expenditure for which the Government is responsible will be very much lessened thereby. I, therefore, think the policy is a perfectly sound one.
I am glad that the Chancellor has not introduced increased indirect taxation into this Budget, but has made the increases in direct taxation alone. I do not suggest that Income Tax is a perfect tax, for no tax is perfect. It has, however, these two merits: in the first instance it is the fairest of all taxes, and secondly, from the point of view of the Chancellor of the Exchequer, it does at least deliver the goods. It can always be relied upon to produce the revenue required, and even to produce more. But to my satisfaction at the fact that there has been no further indirect taxation in the Budget, I would make one reservation, I wish the Chancellor had seen his way clear—and I believe that it would have been in line with the purpose of his policy—to introduce some taxation of luxury expenditure. I would have made a beginning with unjustifiable expenditure on hotel and restaurant bills above a certain minimum.
I had occasion the other day to go with the mayor of the borough which I represent to see the directors of a certain local hotel, and discuss with them certain complaints which had reached us about unreasonable charges. They justified their charges by telling us that we did not realise how the character of the hotel had changed during the last two years, since they had taken it over. They told us that they had spent£10,000 on improving it. I would like the Chancellor of the Exchequer to inquire whether that sum was spent with a view to avoiding Excess Profits Tax. I suggested to them that that was why they spent the money, and that it was not their own money they had

been spending, but the Government's money. They then told us that their charges were justified because they employed 10 chefs—and this is an hotel with only 40 bedrooms. I told them that I thought that was a disgraceful waste of man-power in war-time. I am convinced that this is not the only hotel in reception areas which, since the war, has converted itself from a moderate type of hotel into a luxury hotel, and is tempting people to spend money unreasonably. I believe it would be a good example to impose a very stiff tax on expenditure incurred in places of that kind.
At this point I would like to make a plea to the Chancellor for family allowances. I think that the Chancellor will agree that, though he wishes to control unnecessary expenditure, every household has the right to sufficient purchasing power to obtain at least the necessities of life. I feel that a scheme of family allowances would be a valuable buttress to the Chancellor's wage-stabilisation policy. In particular, I would like him to give further consideration to a proposal which I have already put forward in a Question, that an allowance of 5s. a week should be paid to the parents of children in excess of two who are below the Income Tax limit. It has been estimated that the net cost, after making allowance for existing allowances, would be in the region of £12,000,000 a year—less than the cost of the war for one day. I would ask the Chancellor of the Exchequer, if there are objections to the acceptance of this proposal, to tell the Committee what they are. I bring forward this proposal with all the more confidence because I know that the Chancellor of the Exchequer has a flexible mind. He is open to suggestions, he has shown that in his Budget by the introduction of the principle of compulsory lending or compulsory saving, in regard to the Excess Profits Tax, and also in regard to the credit for allowances. I hope that though up to the present all Chancellors have refused to accept this proposal, he will give it further consideration. I base my confidence also on the fact that the Chancellor has a kind heart. It is not for nothing that he has been Minister of Health for a number of years and he must realise, as few Members of this Committee can realise, what a great social reform a Measure of this kind would be.
May I join with others in expressing regret that the Chancellor has not seen fit to impose an excess Income Tax on individuals whose income has increased during the war? I hope the Chancellor will note that there has been support for this proposal from all sides of the House. The reasons for it are not merely financial. There is a widespread feeling in the country that if you are to take the profit out of war there is possibly more justification for taking the excess income of individuals than for taking the excess profits of companies. If there is strong feeling in this country about taking the profit out of war, it is largely due to the memories we have of the profiteer of the last war—not only of the way in which he made his money, when others were making the greatest of all sacrifices, but also of the ostentatious way in which that money was spent after the war. I ask the Chancellor to give this matter further consideration.
My last point relates to savings. It has been asked whether the Chancellor will be able to get in the savings this year for which he is hoping. I think he should, in view of the increased spending by the Government. I agree to some extent with the criticism which was made yesterday about the War Weapons Weeks. It would be much more helpful if Lord Kindersley and his Committee would concentrate now on a campaign to increase the number of War Savings Groups. If you could get healthy competition between place and place in this manner, it would produce a steady flow of money. In my own constituency we have done quite well in this matter. In particular, we have formed a number of groups in streets. That idea is capable of extension. I was interested to hear that there are Savings Groups in the London shelters. I do not know how many there are, but that shows how, where men and women congregate, an effort is being made to form groups.
I would like the Chancellor to consider again a proposal which I put to him some time ago, that he should encourage people to take their small change in shops in the form of War Savings stamps. This might yield, in the aggregate, a considerable sum. At any rate, it would be part of a campaign to make the nation War Savings-minded. Might I make one more suggestion with regard to the War Savings Movement? The Chancellor

might give further consideration to the question of a lottery loan. If he could issue a loan at a low rate of interest, with prizes for the lucky individuals whose numbers were drawn, he could realise a considerable sum; and, what is more important, I believe he would draw a good deal of money from sources that might not be attracted in other ways.
I agree that this is the first real war Budget we have had. But the reply of the taxpayer to the Chancellor is the same as it is to Hitler—"We can take it." The taxpayer will realise that, if his burden is heavy, it is part of the price he has to pay for liberty. When he pays his taxes he can say that he is buying freedom. This Budget takes us a long step on the way from the economics of comfort to the economics of sacrifice. But that way victory lies. Because of that, I am satisfied that the nation will accept its burdens with cheerfulness; for when the people has willed the end, which is victory, it must provide the means to victory as suggested in the Budget.

Mr. Stokes: I do not propose to follow my hon. Friend the Member for Cheltenham (Mr. Lipson) except in so far as he urged the Chancellor to be of kind heart. I would add that I hope my right hon. Friend shares the view generally accepted by Cabinet Ministers, that a kind heart is much more important than a coronet. In so far, also, as my hon. Friend has urged family allowances, I hope that when the Chancellor does put family allowances in, he will not overlook that very much overworked and underpaid section of the community, His Majesty's Ambassadors overseas! If I congratulate the Chancellor, he will not be surprised at what I am doing because he will know, I am sure, that I am not congratulating him upon what he has done, but upon the way in which he has done it. Chancellors are always expected to produce the proverbial rabbit out of the hat. My right hon. Friend has done so in a most unexpected way this time, by shifting the hat to the other side of the Atlantic, ignoring the fact that the gap is wider than he cared to admit. Others more competent to speak of "bridging the gap" than I am, have already spoken, and I will not take so long in criticising the Chancellor's Budget as the Chancellor took over his great physical effort of presenting it, when he


spent two hours in reading us his economic lecture. But, whatever the Chancellor may think he is doing, he is in fact creating nothing more than a paper bridge, which will collapse sooner or later.
The aspects of the Budget upon which I wish to congratulate him are three-fold. First, he planted the third nail in the coffin of what is known as "the mystery of finance." For the first time, it has been made clear in a Budget that there is no mystery at all. Secondly, he has admitted what I have never heard admitted in any other Budget speech during my short stay in this House, the difference between the internal debt and the external debt. Thirdly, and possibly most important of all, as I understood it—and he will not have expected me already to have head his speech as well as having listened to it—he recognised that taxation is mainly necessary for the prevention of inflation. I do not propose to bore the Committee with a long dissertation on inflation; but, as I possibly misrepresented my own views on the last occasion, I might be allowed to say what inflation is. I once heard it called, in language which perhaps is hardly Parliamentary, "wind in the national belly." Whether that is right or not, inflation, as I understand, means an increase in the amount of money available, accompanied by an increase in prices, so that the purchasing power is diminished. I want to emphasise that it does not follow that because there is an increased amount of money available there is, necessarily, inflation. Surely another way to prevent inflation, which seems preferable by far to the method of taxation, is to go in for a much more thorough degree of price control and rationing. There is another and much more subtle reason for taxation which was described or put out by my old friend Plato, who, some 400 years before Christ, said this, when speaking of "the tyrant, or why we are taxed":
Has he (the tyrant) not also another object, which is, that the people may be empoverished by payment of taxes and thus compelled to devote themselves to their daily wants, and therefore much less likely to conspire against him and if any of them is suspected by him of having notions of freedom and of resistance to his authority, he will have a good pretext for destroying them by placing them at the mercy of the enemy; and for all these reasons, the tyrant must always be getting up a war.

I am not trying to put the cap on the head of any particular member of the Government as being the tyrant in this particular case; but it is well to remember, when we speak of taxation, and especially when we come towards the end of a long and devastating war, that the object of taxation is to take power out of the hands of the people and to keep them poor. I said earlier, that the Chancellor of the Exchequer had thrust the third nail into the coffin of the mystery of finance. The Chancellor of the Exchequer is keeping mixed company in this case. The first nail was put in by Herr Hitler when he declared that "financial obstacles were not to bar the way" to his own progress, and the second by President Roosevelt, especially after the Lease and Lend Bill, and perhaps more particularly when he said "get rid of the dollar sign and cut out the financial nonsense." I suggest that the Chancellor of the Exchequer has in this Budget gone a fair way towards completing this triumvirate, but whether he likes his bedfellows or not must be for him to decide.
I must say a few words about the Excess Profits Tax and the rebate of 20 per cent. that the Chancellor proposes. There has been a good deal of argument since the Budget was presented as to the justice or fairness of this 20 per cent. allowance. I say at once that I wholeheartedly welcome it, provided that, when the time comes, we do not find that the Chancellor's nest egg as he called it has been addled. What is not realised by persons who criticise this proposal is that the profits of the standard year on which a company is assessed for Excess Profits Tax, the standard profits are themselves subject to the increased Income Tax. I will quote the figures of one company with which I am familiar. The standard year of this company was shown to be 1936 when the declared profits were£28,000. In 1939, the first year in which there was any war effect, the balance-sheet profit was shown as£22,000. The taxes were nearly£19,000. In 1940 the balance-sheet profit was£17,500 but the taxes were£52,600. The relative turnovers were about£750,000 and£1,000,000. I want to emphasise that the full profits of the standard year of£28,000 did not go to the company at all. The profit was reduced, by a greatly in-


creased Income Tax, from£28,000 to£17.000.
I am glad that the Chancellor of the Exchequer has made this concession. I, personally, think that it will go a long way towards encouraging people to save and produce economically. I suggest to my right hon. and hon. Friends above the Gangway that, from the point of view of people who feel as we do, this can do no harm. The money has been ploughed back into the business and therefore, if the present system goes on when the war is over, the workers will, at least, find the plants on which they are working in a more efficient state. If, on the other hand, a degree of nationalisation takes place, they will also get it back in that way. Therefore, on all counts, I consider the Chancellor's recommendation to be a very sound one.
There was one point which was not clear to me when the Chancellor of the Exchequer was speaking about allowances on borrowed capital. If the Financial Secretary will tell me now, I will give way. Will bank overdrafts used in financing a company rank as capital employed in the business? I interjected such a query in the Chancellor of the Exchequer's speech, and I was met with a chorus from behind, "Of course, it would," but I am not sure whether the actual overdraft from the bank used in business will be subject to the 8 per cent. allowance. I would emphasise the point made by others, that industry finds itself at the present moment in a very big difficulty, very largely because Government Departments are so bad at paying their dues. The majority of us—and I speak with some feeling in this matter—have to pay our taxation out of overdrafts. I, personally, have hit upon a very simple scheme of referring the tax-collector to the Department that owes me money and telling him to go and get it from them, but whether that could be sustained in law I do not know. But the Chancellor of the Exchequer should hurry up the Departments in the payment of their accounts.
The Chancellor's Budget is a complete failure from my point of view because it does not deal with the land question at all. I am not going to quote thousands of instances because so many of them are known already. It is iniquitous that big profits should be made out of land sales

at any time, but especially during war. I have tackled the Chancellor of the Exchequer, to try to get him to say whether such sales are subject to taxation, and he answers either that they are capital sales or revenue sales and cannot be disclosed under the Income Tax laws. It is very wrong and contrary to our ideals of equal sacrifice that landlords should be allowed to make profits out of land sales to the Government in respect of land necessary for the war effort. I favour, not the nationalisation of land but the collection of the economic rent publicly created for the public good. Land sales during the war should be subject to 100 per cent tax, and at once.
The Chancellor of the Exchequer said that a land valuation in war time was impossible. Would it really be impossible to say to the landlords, "Carry out your own valuation and we will take that as the basis either of taxation or of sale, and the Chancellor of the Exchequer reserves his right to do what he likes"? They would be careful not to fix it too high for the purposes of taxation or too low for purposes of sale. It would all of course have to be subject to revision later from time to time. We have had experience of the effect of the land blockade. We all know what happened in the case of the aerodromes where some 56,000 acres of land were purchased up to the end of 1938 at£40 an acre, totalling some£2,500,000. Now a further 1,000,000 acres have gone for that purpose, but we are not told the price because it is "not in the public interest." That is just humbug, so that the people shall not know what the price really is and the toll the landlords are levying. Then, of course, in this connection I would remind the Chancellor of the effect on "blitzed" cities. I understand that something is to be done in the way of altering the law, but it seems iniquitous that a Member of the Government, in Sheffield recently, compounded for three years a ground rent, after the premises on the site had been completely obliterated. It was said that he could do that and that it was considered a fair and just thing to do. Well, I could use a very rude word in describing what form of justice I consider that to be.
Again, the Chancellor did not deal with our old friend '' the Old Lady of Thread-needle Street"—the Bank of England. He is bridging the gap by a paper bridge.
I know that others who have spoken have referred to the£700,000,000 of new money which has already been created. Is that to be done by the bank and become an interest or debt-bearing loan? Are we to have it in perpetuity? Why cannot the Government take power to create credit and take it away from the hands of the banking people. A boom-slump system is absolutely essential for money-lenders and we shall go back to it when the war is over, if they have anything to do with it. I would like to quote a sentence from a speech made by Mr. Randolph Bedford in the Brisbane Parliament on the 12th September, 1940. It is:
Depressions are necessary to the usurer; otherwise industry would get itself out of debt.
I think that is a true remark and I would commend the whole of that speech to the Chancellor for his future study. If he would promise me to read it I would send him my own copy. May I read from a report in the '' Manchester Guardian '', of 18th December, 1839, which recorded a special meeting of the Manchester Chamber of Commerce and manufacturers? It states:
… the Board will add a reflection upon the subject of undue privileges possessed by the Bank of England. That such a power over property, and, as has been seen, the health morals and very lives of the community should be vested in the hands of 26 irresponsible individuals for the exclusive benefit of a body of bank proprietors, must be regarded as one of the most singular anomalies of the present day. That the secret of these individuals, veiled as they are, even from the eyes of their own constituents, should decide the fortunes of our capitalists, and the fate of our artisans—that upon the error or wisdom of their judgment should depend the happiness or misery of millions and that against most capricious exercise of this power there should be neither appeal or remedy; that such a state of things should be allowed to exist, must be regarded as a reproach to the intelligence of the age and totally irreconcilable with every principle of public justice.
These sentences might have been written by several of my hon. Friends only yesterday or the day before. If I may perhaps bring it nearer home may I remind the Committee of one of Mr. Montagu Norman's sayings in 1939, when discussing loans to Germany, as quoted by Mr. Bedford in Brisbane on the 12th September. He said:
We will have to give Germany a loan of£50,000,000. We may never be paid back but it will be less loss than the fall of Nazism.

It is quite wrong that any groups of individuals should have these powers and the time has come when the Government should take steps to form a national corporation of the Bank of England to take over the powers which it at present controls.
May I say one or two words about waste? Other speakers have addressed themselves to this subject and I shall limit my remarks merely to reminding the Chancellor that it is two or three years ago now since I suggested to the then Chancellor of the Exchequer that, if he would give me the job I would save him£300,000,000 a year on rearmament. That was following the boast of the Senior Burgess for Oxford University (Mr. Herbert) that he would get£30,000,000 out of a betting tax. I would remind the Chancellor that we have had a report about militia camps and have learned that£60,000,000 has, unnecessarily, "gone down the drain." If my calculation is right it means something in the order of about is. 9d. on the Income Tax. I do not want to say anything about the procedure that the Government are adopting to ascertain whether or not a prima facie case lies with regard to any dishonesty, but I do say that, whatever the report may be, it is incumbent upon the Chancellor to see that this matter is thoroughly investigated and that all possible steps are taken to prevent anything of the kind occurring in the future in any Department of State.
I wish to add a few remarks on the ancient sport of "kidding" people. In seems' to me that it is quite time people were instructed as to what some of these things mean and that the Chancellor should not allow either his satellites, his officials or the people who speak for him, to continue "kidding" the people in the way that they have been doing in the past. He did his best in his Budget yesterday but he cannot get on to all the rostrums himself and what is wanted is a general instruction from him as to what is to be said and what is not to be said. First of all, with regard to "the national balance sheet." I do not think I heard the Chancellor mention it yesterday but there is no such thing as a national balance sheet. All we get is an expenses account and in all this fantastic talk about borrowing in order to run the war, we neglect to take any recognition of the fact


that we shall have an asset value when the war is over. I understand why; it is the same old game of "kidding" the people. Secondly, with regard to paying for the war I want to emphasise what I have emphasised on previous occasions—that no wars are ever paid for financially. We never paid for the last war and I am doubtful whether we ever paid for the Battle of Waterloo. I am certain that we shall never pay for this war financially even when it is over. The fact is that we pay for wars by the sweat and blood of the soldiers and workers at the time they are fighting. The great game of bridging the unbridgable and balancing a nonexistent balance-sheet merely allows the money creators in the background to run off with the swag. The method by which we run wars is to give up our liberty, stop doing the kind of things we want to do, and having the kind of things we want to have, and in no other way whatsoever. Then there is the fallacy about Spitfire Funds and War Weapons' Weeks. I agree that Spitfire Funds are merely voluntary taxation. Why not call these efforts by their real names?

Mr. Woodburn: It is not so romantic.

Mr. Stokes: Why not tell the truth? It does not matter how much is subscribed, it will not produce another single Spitfire, any more than a War Weapons Week will produce more war weapons. I regard War Loans as a fallacy and I must quote Lord Kindersley on this subject, because he is the man involved. He said:
I do not disagree with the expressed belief that it does not make a pennyworth of difference whether you subscribe or not, providing you bank your money and do not spend it.
I asked the Chancellor recently to send out circulars inviting the public to put their money on deposit with the Treasury and not in the banks or into War Loan. Why pay the banks for something which they do not possess? Why not deposit it with the Treasury, which could pay a half per cent. on the money? It is far cheaper and far more patriotic generally from the point of view of financing this war, when the dreadful burden of interest which we shall incur will be about£600,000,000 a year when the war comes to an end. I quite agree with the man who said that the National Debt is a national fraud and that it must be wiped out and not transmitted from generation to generation.
In summarising my remarks may I say this: I regret that the Chancellor has not dealt with the land question and has not, in my view, properly dealt with the whole of the money situation. The total paid to landlords every year is£500,000,000, mostly for owning land with a community created value and the total to be paid to the money lenders when the war is over will be£600,000,000 annually. There you have£1,100,000,000 going to the two biggest sets of parasites in the community. I ask that, before the war ends, the right hon. Gentleman or his successor will pay attention to this matter, and see that people are not fleeced either now or when the war is over.

Captain Elliston: As many hon. Members are anxious to hear an early reply to the Debate by the Chancellor, I will be as brief as I can. I want, first of all, to put two points which I think call for special attention. I think my right hon. Friend the Chancellor has already been approached by the chairman of the Metropolitan Water Board in regard to the steps that are being taken to avoid increases in the cost of living. The Chancellor has promised certain measures to restrict rises in the price of such essential services as coal, gas and electricity, and I hope he will see his way to include water, which is so indispensable to the health and comfort of the people, in that category. In London the Metropolitan Water Board have already reached the maximum charges within their power, and I think it is very desirable that any further rise should De prevented.
Another point which I want to raise relates to the compulsory loan payments which I should prefer to call "deferred pay." We are told that these payments are to be credited to a person's account with the Post Office Savings Bank. I suggest that those credits might also be paid into the trustee savings banks. In many towns in England the trustee savings banks enjoy the special confidence of the local people. In my own constituency there are as many as 70,000 depositors in the local savings bank. I think, therefore, it should be made possible for these credits to be paid into the trustee savings banks as an alternative to the Post Office Savings Bank.
A very serious matter to which I want to draw the Chancellor's attention is the proposal to abolish the Medicine Stamp Duties, which means the surrender of approximately £800,000 a year in revenue. In 1939, my right hon. Friend's predecessor also proposed to abolish these duties on the grounds that they were out of date, difficult to administer, and of doubtful legality. At that time our financial position was a great deal less serious than it is to-day, but over 200 Members took such a serious view of the proposal that they supported an Amendment to postpone its operation, and the Chancellor in his wisdom decided to withdraw the proposal. At the present time, when we are taking a tooth-comb to find sources c f revenue, I beg the Chancellor to think again before he surrenders this amount which a great industry can well afford to pay. We are told that various interests concerned, assisted by the hon. and gallant Member for the Lonsdale Division (Sir I. Fraser), have come together and reached agreement, and that the Minister of Health will, as soon as possible, introduce legislation "to maintain a fair balance between the interests of the pharmacists and other vendors." Personally, I welcome the recognition of the special position of pharmacists, for I am a great believer in the guarantee provided in any calling by a proper professional qualification. Also, I think that the recognition of the pharmacists is a great protection to the public, because pharmacists are the right people to handle drugs and very often give a wise word of advice to the public on their uses and dangers. But are the pharmacists and the manufacturers the only people concerned in this matter? Are the consumers to have no consideration? Is it enough that the Committee should consider only the interests of the vendors?
It is curious that my right hon. Friend the Chancellor and his predecessor have both completely omitted any reference to the Select Committees which have considered the subject of Medicine Stamp Duties during the past 30 years. In 1914 there was a report from a Select Committee exposing the scandals which then existed in connection with that industry. Fortunately, most of those scandals have since been abated. However, as recently as July, 1936, another Select Committee

reported and recommended that the Duties as at present applied were admittedly out of date, that skilled evasion and court decisions had reduced the yield from the Duties by 50 per cent. and that the Duties should be simplified to remove anomalies, difficulties and irregularities of administration. Further, in spite of some evidence to the contrary, the Committee were of the opinion that the trade was suitable for taxation and that a further large range of preparations should be liable for the Duties. Those were the considered recommendations of a Select Committee which sat less than four years ago, which have not been mentioned in this Debate, and which were ignored in the Debate on the last Budget. Assuredly, these recommendations ought to be considered seriously before Parliament agrees to the present proposals. The Select Committee estimated that the turnover of the patent medicine manufacturers could, at a modest valuation, be put at£20,000,000 a year, and that the taxation which they proposed would yield not less than£3,300,000 a year, an amount which would surely be welcome to the Exchequer at this time.
I have referred only to the financial aspect of the matter, but I am much more interested in its public health implications. For several years there has been in existence the Parliamentary Committee on Food and Health, set up by Members of the House, who have brought in expert advisers from outside. That Committee has worked to educate the public in the matter, and they have had helping; them the Association of Municipal Corporations and other bodies representing local authorities, associations representing the medical, dental and nursing professions, and above all, associations representing tin: newspapers. All of these have come together to help to protect people from the bad results that come from the extravagant practice of self-medication. Yet we are now asked to agree to proposals to remove a tax which, to some extent, acts as a check on the extravagant indulgence; in this habit. The great newspapers have also helped by instituting a voluntary system of censorship to cut out the extravagant and unfounded claims made for so many secret remedies. Meanwhile this educational campaign was supported year after year by the report-of the Ministry of Health, and successive


Ministers gave a friendly hearing to deputations. On one memorable occasion, when the right hon. Gentleman was Minister of Health, we had a most sympathetic reception and a complete understanding of the case submitted. The hon. Member for Shrewsbury (Mr. A. Duckworth) introduced a Bill to control advertisements of proprietary medicines in February, 1936, but unfortunately it clashed with the Grand National and he was counted out. Many of us have been hoping that that Rill will be brought in again. Certainly we expect some Bill, and we think we are entitled to it.
What will happen if this Duty is abolished? It is notorious that there will be a marked increase of drug-taking and self-medication. These patent medicines which cannot now be sold under about is. 3d. will be put on the market in 6d. and 3d. packets. They will be obtainable from automatic machines and ' cover the counters of the chain stores. They will be available in every grocer's shop. In fact, it will be inviting the people to go in for an orgy of self-medication. It is useless for the Ministry of Health to tell people that the money they are spending on medicines would be better expended on good food, and that they should seek medical advice instead of attempting to treat aliments which may become a serious illness.
If the Chancellor is determined to wipe out the Stamp Duty, then I think we are entitled before he does so to have a Bill, which I understand the vendors are ready to accept, which will control the advertisement of medicines and secure some measure of protection for the public. We should have that Bill on the Statute Book before we think of surrendering this revenue of£800,000, at a time when we want every penny we can get hold of. On a former occasion, when we' tried to secure legislation, we had the support of the Proprietors Association of Great Britain, who represent the reputable manufacturers. They were absolutely loyal in this support, as were the newspapers and the medical profession and other responsible bodies. But the Proprietors Associations do not represent the whole of this trade. There are a number of people who are not so reliable, who did not hesitate to come down to this House and lobby against the former Bill. We want to make sure that we have control

of these people and some small measure of protection for the public. I make this appeal to the Chancellor of the Exchequer. He has had experience at the Ministry of Health and is well aware of the dangers to which I have referred. If he remains determined to ask for the abolition of the Medicine Stamp Duties, then I beg of him to postpone the matter until Parliament has secured control of medicines and medical appliances on the lines proposed in the Bill introduced by the hon. Member for Shrewsbury to which I have already referred.

The Chancellor of the Exchequer (Sir Kingsley Wood): May I say, in answer to my hon. and gallant Friend the Member for Blackburn (Captain Elliston), that I will, of course, take into account what he has said and the suggestions he has made. With regard to that particular matter, I hope he and any of his friends who may be thinking with him will come and see me on the proposition he has put forward. I will only again repeat that the proposals which I have made, if they are to be effective, must be contained in the Finance Bill, and I hope, as the interests concerned are in agreement, that in any representations made to me it will be possible to maintain that agreement. I should like to say a few words on certain matters which have been raised in the course of the Debate. My hon. Friends will appreciate that I could not, nor would I think it necessary, answer every point which has been made. We shall have many opportunities in the course of the Finance Bill to deal with the points to which reference has been made, and I will endeavour to answer then some of the matters which I may not mention to-day.
I would, of course, like to express my indebtedness to Members in all parts of the Committee, to the country generally, and to the organs of public opinion, who have expressed themselves in approval of the proposals I made two days ago. What has been particularly gratifying to me, and I think it will be gratifying to every one of my hon. Friends, is that this Budget has not been a matter of interest only to ourselves, but has been a matter of considerable interest and moment to other countries besides our own. It is gratifying to all of us to have received comment from the United States expressing the view that this particular Budget


constitutes one more evidence of the determination of the British people to put all they have into the fight. Equally satisfactory observations have come from Australia and our other great Dominions. I am sure that will hearten us in making the many sacrifices which are involved in these proposals. I would say that I think in the proposals I have made I have interpreted the wishes of the nation. Undoubtedly the country wants to pay fairly and squarely for the war, and I agree with many of my hon. Friends who have put the point, quite rightly, that the only stipulation, in fact the only comment, which all our fellow citizens would make in connection with the very severe impositions which follow these proposals, is that these vast sums should be expended properly and so as to avoid waste and extravagance.
There is no doubt that these proposals mean a very heavy new burden, but I believe, and my hon. Friends in all parts of the Committee have expressed the same view, that they will be borne with patriotic fortitude. We have taken, if you like, a short and stern way to deal with the grim realities which face us, and I have endeavoured not only to concern myself with the present financial situation and the financing of the war, but also to have regard to the conditions which we shall have to face, and which I hope we shall be able to face successfully, in connection with our post-war problems. I have said that this will mean a heavy burden. My hon. Friend the Member for East Birkenhead (Mr. Graham White) pleaded for sympathetic consideration by the Inland Revenue of the difficulties of taxpayers faced with these new impositions. While of course it is the duty of the Inland Revenue to collect the tax charged, and to act firmly whenever a taxpayer is refusing without good reason to pay, or has been dilatory, it is not the policy of the Inland Revenue to be harsh and unsympathetic in cases where it is shown that the taxpayer has fallen on evil times, particularly if his struggles are due to the war or to any other circumstances quite beyond his control. The collector will in such cases give the taxpayer reason-able time to pay, or allow the amount itself to be paid by instalments, and any taxpayer who finds himself in the position that I have described should, in the first

place, see the collector and place the facts before him.
I propose to deal with only three or four of the main points which have been raised, not by way of criticism of these proposals, but rather dealing with some aspects of them which have impressed themeslves upon the minds of some of my hon. Friends. There has been a certain amount of questioning—I would not call it criticism — about what is regarded in some quarters as my optimistic view about the possibility of a further increase in genuine new savings. I realise, of course, to the full the effect which high taxation has and will have upon the incomes of many individuals, but, heavy though those burdens are, I do not think they ought to be allowed to colour too much our assessment of the fundamentals of the economic and financial situation. I have been careful to explain, and I will again say, that I have no wish to be dogmatic either about the exact size of the gap that we have been talking about or about its closing with what I would call arithmetical precision. I was at great pains to make this point in my Budget speech. To me, the battle that we are waging against inflation is very like a boxing match. What we must do is to size up our opponent, inflation, and, when we have got his measure, hit him so hard and so often that the result becomes a foregone conclusion, whether it is a knockout or an overwhelming victory on points.
As regards the doubts which have been voiced, particularly by my hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne), I should like to lay before the Committee one or two practical considerations on the other side. I think, in the first place, there is good reason for the hope that an increase in the level of private savings over and above the basic figure which I took for the purpose of my Budget speech is already under way. The recent weekly statistics of gross savings certainly point in this direction. Secondly, the increased taxation will only begin to be deducted from salaries as from 1st November, and from weekly wages as from 1st January next. There is, therefore, good reason for anticipating that in the period before those increased deductions begin to operate the unceasing and, as I see it, valuable propaganda of the National Savings Campaign will succeed in raising genuine savings to a new high level.
Moreover, the Budgetary calculations which I gave the Committee in my assessment of the gap are in fact a reflection of the underlying economic situation. As far as we can judge by all the information at our disposal, there will be an increase of gross purchasing power plus a decrease in the value of goods available which, taken together, would correspond with my judgment that the gap is of the order of£500,000,000. In other words, an excess of purchasing power will exist. My taxation proposals, either through their direct effect or through the accrual of funds to meet my future demands, will make a very substantial cut in this excess purchasing power. A balance, however, will still remain, and, although I recognise that not even the most forceful campaign will prevent some of it from escaping through such alternative channels of expenditure as still exist, it remains the case that the economic and financial policy of the Government will direct the greater part of this balance into savings. I think the Committee will see that sources of increased savings exist, and that the whole force of the Government policy will serve to give for those sources no substantial outlet other than taxation or savings. Therefore, the facts of the economic situation join with the record of the National Savings movement in justifying my hope that a considerable increase in new savings can and must be attained.
There is another matter which, quite rightly, has been the subject of discussion, that is with regard to prices and subsidies. One of my hon. Friends rather suggested that in my assessment of the size of the gap I had not taken into account the financial effect of the extension of the policy of restricting increases in prices to a minimum. I assure the Committee that that is not the case. When I was giving my estimate of the likely expenditure during the coming year, I was at pains to explain that it was based upon the supposition that there would be no substantial increase in costs. Moreover, when I dealt with the extension of Exchequer aid to control price increases I said that 1 had included in my estimate of expenditure a margin to provide for this extension of policy. I do not mean, of course, that I included an exact allowance for this purpose, but that in the making of the calculations regard was paid to the effect

upon the Exchequer of this important development of policy.
There is another aspect of the matter which was raised indirectly by the hon. Member for Walsall (Sir G. Schuster) in a question that he asked about the wisdom or un-wisdom of the policy. The Committee will appreciate that increases of prices of the kind which we are endeavouring to control hit the community in two ways. In the first place, they involve a greater outlay by individuals, and, in the second place, they enter directly into the total of the Exchequer expenditure and thus hit the members of the community in their tax-paying capacity. That this is so can be shown particularly by considering the illustration I gave in my Budget speech. Big increases in transport costs or in fuel costs mean that the Exchequer, as the largest user or the largest customer, would have to shoulder a high proportion of such increases. The policy of the Government is to prevent what I would call the circular movement. It can, therefore, be described as worth while, not only from the point of view of the individual, who would be affected by substantial increases in prices, but from the Exchequer point of view as such.
My hon. Friend the Member for Walsall raised another important matter which I should like to assure the Committee has been given due and proper consideration. He questioned whether the money spent on food subsidies was really being spent to the best advantage. Incidentally, he mentioned a figure of£120,000,000, although the figure I gave in my statement was about£100,000,000. On the general point I can give the Committe an unhesitating assurance that we have the consideration which he brought forward very firmly in our minds and that we have no intention of allowing the subsidy policy to be used as a cloak for inflating prices or margins. On the contrary, both the Ministry of Food and the Treasury are determined to see that the prices and margins which the Government allow are firmly controlled and that the consumer is getting full value for the expenditure of the taxpayers' money. My hon. Friend will not expect me now to go into details about the prices which the Ministry is paying for various commodities or about the margins which are being allowed in the various distributive trades,


but under the first head I can assure the Committee that the f.o.b. prices which the Ministry of Food is paying for its imported foodstuffs are generally very close to the pre-war level. It is the firm policy of the Ministry to keep them as near as possible at that level. This, I think, answers the first point and shows that the increased prices which we are paying for imported foodstuffs are going mainly towards real increases of costs, such as freights and insurance.
With regard to the margins and other forms of remuneration allowed to the distributive trades and the processing industries of the country, the Ministry of Food has an entire costings branch which is constantly engaged in examining the costs of the various firms and trade associations, and the margins are kept under close scrutiny by the Ministry and the Treasury together. It is our policy to obtain that degree of what I may call concentration of distribution to match the concentration of production which is now being brought forward by my right hon. Friend the President of the Board of Trade. This undoubtedly calls for increased watchfulness on the part of the Government in order to see that the distributive margins are not increased or even maintained at a level beyond that which is required by the current volume of supplies. I can assure the Committee that both the Ministry of Food and the Treasury are alive to this point.
I would like to say a few words upon the discussion which has taken place about the Excess Profits Tax. In the proposals which I have made I retain, as in fact I must, the whole of the 100 per cent. and I have directed my proposals to helping the position at the time when most help will be needed after the war. As far as I can ascertain from the correspondence that has come to me that policy has met with general approval. There has been some criticism about the propaganda which has been made on this subject, but I should like to say that in very many cases where business interests have approached me their whole idea and anxiety has undoubtedly been as to where they would stand at the end of the war and how they would be able to face their many difficulties. It is only right that I should say that there has been no selfish motive prompting their representations

but only real anxiety as to the future. When I said I was prepared to make this proposal but that there would be a liability to Income Tax, I was afraid from some murmurs that I heard in various parts of the Committee that there was a certain amount of disappointment about my statement. I hope that I can persuade the Committee that it was a reasonable attitude for me to take up.
A payment of Excess Profits Tax is by statute a deduction in computing a concern's liability for purposes of Income Tax. A repayment of Excess Profits Tax is treated as a trading receipt for the same purpose. It follows, with the Excess Profits Tax at 100 per cent. that the part of the concern's profit which represents excess profit is taken as Excess Profits Tax and is not liable to Income Tax, while the balance of the profit is liable to Income Tax only. If a part of the excess profits which is taken in Excess Profits Tax and consequently escapes Income Tax is to be repaid after the war, it should obviously, like any other repayment of Excess Profits Tax, be treated as a trading receipt for the purposes of Income Tax. If it were not so treated, the result would be that the part of the excess profit made during the war and subsequently repaid would escape any liability to both Excess Profits Tax and Income Tax. I hope that my hon. Friends, therefore, will not think I have been unreasonable in that particular.

Mr. Lipson: At what rate will the Income Tax be charged?

Sir K. Wood: My hon. Friend is asking me to become a prophet. It will be the rate of Income Tax ruling at the time when the repayment is due. The hon. Member for Ipswich (Mr. Stokes) may be standing at this Box as Chancellor, and goodness knows what it will be. Some questions were raised by my hon. Friend the Member for Southampton (Dr. Russell Thomas) and my hon. Friend the Member for Edgbaston (Sir P. Bennett). I would like, as many of my hon. Friends have done, to congratulate my hon. Friends on two very fine maiden speeches. My hon. Friend the Member for Edgbaston, speaking of the Excess Profits Tax, put forward very fairly and reasonably the case he desired to make. I know that it was put forward with the desire, which I think a great number of people have, simply to


secure the post-war position of trade and business.
Criticism has been made, in particular by the hon. Member for Walsall, that with Income Tax too rigid a line is drawn in determining what expenditure is properly allowed as a deduction in computing profits. The expenditure which it is claimed should be allowed is, I gather from my hon. Friend, expenditure of a capital nature. Where the assets acquired by such expenditure are subject to allowance for wear and tear, most of the expenditure is allowed for tax purposes in. the long run. Moreover, I would point out that a special depreciation allowance is given for Excess Profits Tax purposes, and I have also undertaken—and I hope to implement it—to extend this to Income Tax; but I must say I am afraid I cannot go further than that. I should like my hon. Friends to see the consequences if I did. If an allowance were to be given for all kinds of capital expenditure and all kinds of reserves which a prudent business man considered expedient, the tax revenue would, in fact, be at the mercy of every board of directors, who could decide in their own way just how much of their profits should be subject to Income Tax. Income Tax is, after all, a tax on income, and to allow capital expenditure to be deducted would, I am afraid, undermine the whole principle upon which the tax is based.

Sir Robert Tasker: Could anything be done to expedite the refund of over-payment of Income Tax?

Sir K. Wood: I will make a very familiar reply to that question. If my hon. Friend will send me a case, I will examine it with pleasure.

Sir R. Tasker: I will do so with pleasure.

Sir K. Wood: One other matter was put forward to-day to which I should like to give a short reply. My hon. Friends will remember that one of my proposals is to deal further with wasting assets in relation to Excess Profits Tax, and I have been asked whether gold is one of the metals which will rank for the allowance I am proposing in the case of concerns engaged in developing wasting assets. The production of gold is of very great importance to the war effort, and the answer to that question is that it will. Detailed

provisions as to the allowance to be made will, of course, be contained in the Finance Bill itself.
The hon. Member for East Ham South (Mr. Barnes) raised the question of the post-war commitments of the Exchequer, and expressed the hope that policy in this respect had not been entered upon lightly or without serious consideration. As regards the commitments in respect of Excess Profits Tax and the credits which are proposed in this Budget, I understand they have been generally accepted as a very useful provision for after the war and as being a good line of policy. While it is obvious that at this stage I cannot be precise about the nature of the measures to be taken to deal with this problem, since they depend upon the general state of trade and of employment at the time, I think I can say that I can see no reason why we need have any qualms about our ability to deal with any problem of this kind when it arises.
In this connection I would like to emphasise that after the war a very large expenditure will be required out of the national income under a great variety of heads, such as the repair of war damage, modernisation of obsolete plant, development of the export market, and so on. That this should be so is a matter for congratulation rather than otherwise, since I think that, rightly handled, it should provide the means by which to avoid relapsing into a state of chronic unemployment. ' The credits provided for in the Budget proposals will in effect form a relatively small element in the total situation, but will mean that the power of participating in the post-war expenditure will be more fairly distributed than might otherwise be the case. For instance, postwar credits to individuals will go in the main to the small taxpayers, that is to say, to the very people who might be expected to need them most in post-war conditions. In the case of Excess Profits Tax, the repayments will go to businesses which are able to satisfy the conditions that I outlined in my Budget speech, that is to say, companies which are incurring expenditure upon objects such as the replacement of obsolete plant, expansion of business and the like.
As I see it, one of our principal postwar problems will be to regulate the rate of expenditure under all heads, with a view to maintaining good employment


over a prolonged period, without overdoing it in the sense of facilitating more expenditure than we have physical resources to provide, and thus producing post-war inflation. That is my answer to those who have expressed doubts and criticisms. I hope that the Committee will be assured that I am confident about these proposals and others that were mentioned. They have been the subject of very anxious and serious consideration. In regard to these Budget proposals, I have had the advantage of advice from many people outside the Treasury, and they have been subjected to very careful examination by myself and my officers for some time now. They were put forward deliberately after a good deal of thought and consideration, not only to deal with immediate matters, but with an eye to the future and to the position which we will have to face when the war is over.

Mr. Stokes: Will the right hon. Gentleman be good enough to answer the question which I put to him, as to whether we are right in understanding from his Budget statement that overdraft money employed in the running of a business will rank for purposes of taxation as capital, if it is employed in the business?

Sir K. Wood: My hon. Friend can go away for his holiday, happy and pleased, because money borrowed from the bank on overdraft and employed in a business will be treated as capital for the purpose of E.P.T.

Question,
That it is expedient to amend the law relating to National Debt and the Public Revenue, and to make further provision in connection with finance,"

put, and agreed to.

Orders of the Day — NATIONAL LOANS.

Resolved,
That, —
(1) the power of the Treasury to raise money under Section one of the National Loans Act, 1939, shall include power to raise any money required for raising any supply granted to His Majesty for the ser vice of the year ending the thirty-first day of March, nineteen hundred and forty-two; and in addition a sum not exceeding two hundred and fifty million pounds;
(2) further provision shall be made as respects the mode of transferring stock and bonds issued under the said Act and as respects the registration thereof and certificates of ownership thereof." —[Sir K. Wood.]

Resolutions to be reported upon the next Sitting Day; Committee to sit again upon the next Sitting Day.

Orders of the Day — SUNDAY ENTERTAINMENTS ACT, 1932.

Resolved,
That the Orders made by the Secretary of State for the Home Department under the Sunday Entertainments Act, 1932, for extending Section one of that Act to the under mentioned areas, namely—
(1) the Borough of Lewes,
(2) the Rural District of Easthampstead, copies of which were presented to this House on 7th April, be approved." —[Major Dugdale.]

The remaining Orders were read, and postponed.

ADJOURNMENT.

Resolved, "That this House do now adjourn." —[Major Dugdale.]